Question

Purchases Budget

Rest Inn provides four-star accommodations for the vacation traveler. It is located just off a major interstate freeway. There are three other competing motels at the same exit. Hotel management is preparing its budget for the busiest three-month period of the year, June through August. To differentiate themselves from the competition, Rest Inn provides a complimentary spa package for each guest stay that includes specialty shampoo, conditioner, soap, lotion, toothpaste, lavender essential oil, slippers, earplugs, and a sleep mask. Rest Inn purchases the spa package from a local vendor that puts the Rest Inn private label on the products. The hotel follows a policy of purchasing enough spa packages to ensure that 40% of next month’s bookings are in the current month’s ending inventory. Rest Inn’s sales budget for guest stays for the next quarter is as follows:

June	2,300 guest stays
July	2,500 guest stays
August	2,100 guest stays

How many spa packages should Rest Inn budget for purchase in July?

Answer

spa packages

Answer 1

Answer

Packages Rest Inn should budget for purchase in July = 2,340

Calculations:

Particulars	June	July	August
Sales	2,300	2,500	2,100
Add: Closing Inventory (40% of next month)	1,000	840
Less: Opening Inventory (Closing of previous month)		1,000	840
Purchases to be made	3,300	2,340	1,260

In case of any doubt, please comment.