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Keggler’s Supply is a merchandiser of three different products. The company’s February 28 inventories are footwear, 19,500 units; sports equipment, 80,500 units; and apparel, 49,500 units. Management believes each of these inventories is too high. As a result, a new policy dictates that ending inventory in any month should equal 29% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.

Budgeted Sales in Units
March April May June
Footwear 15,500 23,000 31,000 34,000
Sports equipment 71,000 88,500 94,500 90,000
Apparel 41,000 38,000 32,500 24,000


Required:
1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.

Merchandise Purchases Budget For March, April, and May March April May FOOTWEAR Budgeted sales for next month Ratio of ending

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Answer #1
Merchandise Purchases Budget
For March, April and May
March April May
FOOTWEAR
   Budgeted sales for next month 23000 31000 34000
   Ratio of ending inventory to future sales 29% 29% 29%
   Budgeted ending inventory 6670 8990 9860
   Budgeted sales in units 15500 23000 31000
   Required units of available merchandise 22170 31990 40860
   Beginning inventory 19500 6670 8990
   Budgeted purchases 2670 25320 31870
SPORTS EQUIPMENT
   Budgeted sales for next month 88500 94500 90000
   Ratio of ending inventory to future sales 29% 29% 29%
   Budgeted ending inventory 25665 27405 26100
   Budgeted sales in units 71000 88500 94500
   Required units of available merchandise 96665 115905 120600
   Beginning inventory 80500 25665 27405
   Budgeted purchases 16165 90240 93195
APPAREL
   Budgeted sales for next month 38000 32500 24000
   Ratio of ending inventory to future sales 29% 29% 29%
   Budgeted ending inventory 11020 9425 6960
   Budgeted sales in units 41000 38000 32500
   Required units of available merchandise 52020 47425 39460
   Beginning inventory 49500 11020 9425
   Budgeted purchases 2520 36405 30035
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