Question

Toys Plus prepares budgets to help manage the company. Toys Plus is budgeting for the fiscal year ended January 31, 20x6. During the preceding year ended Jan 31, 20x5, sales totaled 9,400 million and cost of goods sold was 6,700 million. at January 31, 20x5, inventory stood at 2,200 million. During the upcoming 20x6 year, suppose Toys Plus expects cost of goods sold to increase by 10%. The company budgets next years ending inventory at 2,500 million.

One of the most important decisions a manager makes is how much inventory to buy. How much inventory should Toys Plus purchase during the upcoming year to reach its budgeted figures?

Answer 1

Solution:

Computation of Budgeted Purchases - Toys Plus
Particulars	Amount (In Million)
Budgeted Cost of Goods sold ($6,700*110%)	$7,370.00
Add: Ending Inventory	$2,500.00
Total needs	$9,870.00
Less: Beginning inventory	$2,200.00
Budgeted Purchases for the year ended Jan 31, 20X6	$7,670.00