Question

Keggler’s Supply is a merchandiser of three different products. The company’s February 28 inventories are footwear, 18,000 units; sports equipment, 81,000 units; and apparel, 49,000 units. Management believes each of these inventories is too high. As a result, a new policy dictates that ending inventory in any month should equal 28% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.

	Budgeted Sales in Units
	March	April	May	June
Footwear	14,500	27,000	31,000	36,500
Sports equipment	71,500	88,500	96,000	89,000
Apparel	41,500	37,500	32,000	22,000

Required:

1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.

KEGGLER’S SUPPLY Merchandise Purchases Budget For March, April, and May March April May FOOTWEAR Budgeted sales for next month Ratio of ending inventory to future sales Budgeted ending inventory Budgeted units sales for month Required units of available merchandise Budgeted purchases SPORTS EQUIPMENT Budgeted sales for next month Ratio of ending inventory to future sales Required units of available merchandise Budgeted purchases APPAREL Budgeted sales for next month Ratio of ending inventory to future sales Required units of available merchandise Budgeted purchases

Answer 1

Keggler's Supply
Direct Materials Purchase Budget
For March, April, May
	March	April	May
FOOTWEAR
Budgeted Sales for next month	27,000	31,000	36,500
Ratio of Ending inventort to Future Sales	28%	28%	28%
Budgeted Ending Inventory	7,560	8,680	10,220
Add:Budgeted Unit Sales for the month	14,500	27,000	31,000
LessRequired units of available merchandise	(18,000)	(7,560)	(8,680)
Budgeted Purchase	4,060	28,120	32,540
SPORTS EQUIPMENT
Budgeted Sales for next month	88,500	96,000	89,000
Ratio of Ending inventort to Future Sales	28%	28%	28%
Budgeted Ending Inventory	24,780	26,880	24,920
Add:Budgeted Unit Sales for the month	71,500	88,500	96,000
LessRequired units of available merchandise	(81,000)	(24,780)	(26,880)
Budgeted Purchase	15,280	90,600	94,040
APPARAEL
Budgeted Sales for next month	37,500	32,000	22,000
Ratio of Ending inventort to Future Sales	28%	28%	28%
Budgeted Ending Inventory	10,500	8,960	6,160
Add:Budgeted Unit Sales for the month	41,500	37,500	32,000
LessRequired units of available merchandise	(49,000)	(10,500)	(8,960)
Budgeted Purchase	3,000	35,960	29,200