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 28,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months:

January	12,100
February	18,200
March	13,400
April	13,200
May	9,500
June	7,800

Required:

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

Answer 1

Answer- a&b-

MIDLAND COMPANY
MERCHANDISE PURCHASE BUDGET
FOR THE PERIOD ENDED MARCH 31
PARTICULARS	JANUARY	FEBRUARY	MARCH
Estimated unit sales	12100	18200	13400
Add- Estimated sales for next three months	18200+13400+13200= 44800	13400+13200+9500= 36100	13200+9500+7800= 30500
Total inventory needs	56900	54300	43900
Less- Beginning inventory	28000	44800	36100
Units to be purchased (a)	28900	9500	7800
Unit cost (b)	$1.00	$1.00	$1.00
Estimated purchase cost (c=a*b)	$28900	$9500	$7800

Answer 2

44,800 from January becomes the beginning inventory for Febuary.