Shamrock Shades operates in mall kiosks throughout the southwestern U.S. Shamroc

Question

Shamrock Shades operates in mall kiosks throughout the southwestern U.S. Shamrock purchases sunglasses from bulk discounters and sells the sunglasses in the mall kiosks. Shamrock is in the process of budgeting for the coming year and has projected sales of $370,000 for January, $450,000 for February, $610,000 for March, and $650,000 for April. Shamrock's desired ending inventory is 50 percent of the following month's cost of goods sold. Cost of goods sold is expected to be 40 percent of sales Required Compute the required purchases for each month of the first quarter (January-March) January February March Required Purchases

Explanation / Answer

Answer-Required purchase for each month

$342000

Working note1)

Required Purchased For january

Cost of goods sold of febuary=40%of sales

=40% of $450000

=$180000

Required purchase = 50% of cost of goods sold in febuary

=50% of $180000

=$90000

Working note2)

Required Purchased For February

Cost of goods sold of March=40% of sales

=40% of $610000

=$244000

Required purchase = 50% of cost of goods sold in March

=50% of $244000

=$122000

Working note3)

Required Purchased For March

Cost of goods sold of April =40 % of sales

=40% of $650000

=$260000

Required purchase = 50% of cost of goods sold in April

=50% of $260000

=$130000

January February March Total Required Purchase $90000(W.N.1) $122000(W.N 2) $13000(W.N.3)

$342000

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