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.Compute the required purchases for each month of the first quarter.

Answer 1

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

Answer 2

Based on the cost of goods and the projected sales, the required purchases for each month in the first quarter was:

• January - $66,800.
• February - $87,600.
• March - $112,400.

What were the required purchases in January?

= Cost of goods sold + Ending inventory - Beginning inventory

= (20% x 310,000) + 23,400 - (30% x Cost of goods sold)

= 62,000 + 23,400 - (30% x 62,000)

= $66,800

What were the required purchases in February?

= 78,000 + 33,000 - 23,400

= $87,600

What were the required purchases in March?

= 110,000 + 35,400 - 33,00

= $112,400

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