Question

6.

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 $1.25 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		12,000
February		18,300
March		13,700
April		14,200
May		10,400
June		7,200

Required:

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

Answer 1

Merchandise Purchase budget January February March Estimated Sales Revenue 12000 18300 13700 Add:Estimated Sales Inventory 46200 38300 318001 18300+13700+14200 13700+14200+10400 14200+10400+7200 Total Merchandise needs 58200 56600 45500 Less: Beginning Inventory -30000 -46200 -38300 Merchandise to be purchased - A 28200 10400 7200 Estimated Cost per Unit - B $ 1.25 $ 1.25 $ 1.25 Total Estimated Cost of merchandise C= A*B $ 35,250.00 $ 13,000.00 $ 9,000.00