Question

Chang’s Jeans ‘n Tees is a retailer specializing in designer jeans and T-shirts. The company expects to sell 10,000 pairs of jeans each quarter in the first two quarters, 20,000 pairs in the third quarter, and 15,000 in the fourth quarter. For T-shirts, sales are expected to be 20,000 each quarter the first two quarters, 35,000 in third quarter, and 25,000 in the fourth quarter. Managers would like to have only 2,000 pairs of jeans and 3,000 T-shirts in beginning inventory.

Required: Prepare a quarterly purchases budget for jeans and T-shirts. Assume that the sales forecast for the first quarter of the following year is the same as the first quarter forecast for this year.

Answer 1

Purchase budget for jeans:

	Q1	Q2	Q3	Q4
Sales	10,000	10,0000	20,000	15,000
Add: Closing stock	2,000	2,000	2,000	2,000
	12,000	12,000	22,000	17,000
(Less): Opening stock	0	(2,000)	(2,000)	(2,000)
Purchases	12,000	10,000	20,000	15,000

Purchase budget for t-shirts:

	Q1	Q2	Q3	Q4
Sales	20,000	20,000	35,000	25,000
Add: Closing stock	3,000	3,000	3,000	3,000
	23,000	23,000	38,000	28,000
(Less): Opening stock	0	(3,000)	(3,000)	(3,000)
Purchases	23,000	20,000	35,000	25,000