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 $310,000 for January, $390,000 for February, $550,000 for March, and $590,000 for April. Shamrock's desired ending inventory is 30 percent of the following month's cost of goods sold. Cost of goods sold is expected to be 20 percent of sales. Required: Compute the required purchases for each month of the first quarter (January- March) January February March Required Purchases

Explanation / Answer

January February March Expected sales 310000 390000 550000 Cost of goods sold 62000 78000 110000 Add: Desired ending inventory 23400 33000 35400 Total needs 85400 111000 145400 Less: Beginning inventory 18600 62000 78000 Required purchases 66800 49000 67400

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