Question

Midland Company buys tiles and prints different designs on them for souvenir and gift stores It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tries needed for three months' sales The tiles cost $3 each and must be paid for in cash. The company has 28,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months: Estimate purchases (in units) and cash required to make purchases in January.

Answer 1

Answer:

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Midland Company buys tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months’ sales. The tiles cost $3 each and must be paid for in cash. The company has 28,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months:

January 11,900

February 18,700

March 13,600

April 14,700

May 10,300

June 7,100

Required: a. & b. Estimate purchases (in units) and cash required to make purchases in January, February, and March.

Purchases in units  is 30,900 units

Purchases amount is $92,700

Explanation:

The purchases in January is the sales estimate plus the desired ending inventory minus the opening stock of inventory.

The desired closing inventory in the sense implies three months future sales units i.e February,March and April sales units.

Sales in January                                                         11,900

desired closing inventory(18,700+13,600+14,700)47,000

Total required units                                                   58,900

Opening stock of inventory                                       28,000

Total purchases                                                           30,900        

Total purchases in dollar terms=purchases units*sales price per unit

sales price per unit  is $3

total purchases in  dollar terms=$3*30,900=$92,700