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 $3 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		12,400
February		17,800
March		13,200
April		14,200
May		9,600
June		7,200

Required:

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

a. Units to be purchased: January? February? March?

b. Estimated Cost: January? February? March?

Answer 1

Purchase Budget for January, February, March
	January	February	March
Estimated Sales Revenue	12,400	17,800	13,200
Add:Estimated Sales Inventory	45,200	37,000	31,000
Total Needs	57,600	54,800	44,200
Less:Beginning Inventory	28,000	45,200	37,000
Purchases made	29,600	9,600	7,200
Estimated Cost(Purchases made*$3)	$                     88,800	$                28,800	$             21,600
Estimated Sales Inventory for January =Sales made for Feb, March and Apr which is 17,800+13,200+14,200 =45,200