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 $0.75 each and must be paid for in cash. The company has 29,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months: January 12,300 February 17,100 March 13,000 April 14,800 May 9,300 June 6,800

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

	January	February	March
Units to be Purchased	?????	?????	?????
Estimated Cost	?????	?????	?????

Answer 1

	Midland Company
	Merchandise purchase budget
	For the period Ended March 31
		January	February	March
	Estimated sales revenue	12,300	17,100	13,000
Note 1	Add : Estimated sales inventory	44,900	37,100	30,900
	Total merchandise required	57,200	54,200	43,900
	Less : beginning inventory	29,000	44,900	37,100
	Merchandise to be purchased	28,200	9,300	6,800
	Estimated cost per unit	0.75	0.75	0.75
	Total estimated cost of merchandise	21,150	6,975	5,100
Note 1	Estimated sales inventory	January	February	March
	Sale of February	17,100	-	-
	Sale of March	13,000	13,000	-
	Sale of April	14,800	14,800	14,800
	Sale of May	-	9,300	9,300
	Sale of June	-	-	6,800
		44,900	37,100	30,900