Question

Midland Company buys tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months’ sales. The tiles cost $1.00 each and must be paid for in cash. The company has 30,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months:

January		11,400
February		17,600
March		13,200
April		13,400
May		8,800
June		6,500

Required:

a. & b. Estimate purchases (in units) and cash required to make purchases in January, February, and March.

	MIDLAND COMPANY Merchandise Purchases Budget For the Period Ended March 31 (in units) January February March Units to be purchased Estimated cost

Answer 1

Solution

MIDLAND COMPABY
Merchandise purchase budget
	January	February	March
Units to be Purchased	25600	8800	6500
Estimated cost	$ 25,600.00	$      8,800.00	$      6,500.00

Working

MIDLAND COMPANY
Merchandise purchase budget
	January	February	March	April
Units to be sold	11400	17600	13200	13400
Desired Ending Finished Inventory	44200	35400	28700
Total Units needed	55600	53000	41900
Less : Beginning Finished Inventory	30000	44200	35400
Units to be Purchased	25600	8800	6500
Cost per tile	$            1.00	$              1.00	$               1.00
Estimated cost	$ 25,600.00	$      8,800.00	$      6,500.00