Question

Keggler’s Supply is a merchandiser of three different products. The company’s February 28 inventories are footwear, 21,000 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 30% 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	15,000	26,000	32,500	36,500
Sports equipment	71,000	91,000	96,000	89,500
Apparel	41,000	37,000	32,000	24,000

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

Answer 1

Solution:

Merchandise Purchases Budget (in Units) - FOOTWEAR
	March	April	May	June (for working)
Budgeted Sales Units	15000	26000	32500	36500
Plus: Expected Ending Inventory (30% of next months sales)	7800	9750	10950
Total Needs	22800	35750	43450
Less: Beginning Inventory	21000	7800	9750
Merchandise Purchases Budget (in Units) - FOOTWEAR	1800	27950	33700

Merchandise Purchases Budget (in Units) - Sports Equipment
	March	April	May	June (for working)
Budgeted Sales Units	71000	91000	96000	89500
Plus: Expected Ending Inventory (30% of next months sales)	27300	28800	26850
Total Needs	98300	119800	122850
Less: Beginning Inventory	81000	27300	28800
Merchandise Purchases Budget (in Units) - Sports Equipment	17300	92500	94050

Merchandise Purchases Budget (in Units) - Apparel
	March	April	May	June (for working)
Budgeted Sales Units	41000	37000	32000	24000
Plus: Expected Ending Inventory (30% of next months sales)	11100	9600	7200
Total Needs	52100	46600	39200
Less: Beginning Inventory	49000	11100	9600
Merchandise Purchases Budget (in Units) - Apparel	3100	35500	29600

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