Question

Shamrock Shades operates in mall kiosks throughout the southwestern United States. 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 $480,000 for January, $560,000 for February, $720,000 for March, and $760,000 for April. Shamrock’s desired ending inventory is 35 percent of the following month’s cost of goods sold. Cost of goods sold is expected to be 45 percent of sales.

Required:

Compute the required purchases for each month of the first quarter (January–March).

Required puchases for january____, february____ and march____

Answer 1

	January	February	March
Required Purchases	228600	277200	330300

Workings:
	January	February	March
Sales	480000	560000	720000
X Cost of goods sold %	45%	45%	45%
Cost of goods sold	216000	252000	324000
Add: Desired ending inventory	88200	113400	119700
Less: Beginning inventory	-75600	-88200	-113400
Required purchases	228600	277200	330300
Desired ending inventory:
January	88200	=252000*35%
February	113400	=324000*35%
March	119700	=760000*45%*35%
Beginning inventory:
January	75600	=216000*35%