You are operating a retail store that carries only one product. Geezer Wheels! Expected sales for a nine month period are:
Feb 100
March 200
April 400
May 500
June 700
July 1100
Aug. 900
Sep. 600
Oct. 400
1. You feel that these estimates are very uncertain and that the demand for the item miht grow. Due to this concern, you want to maintain an end of month inventory equal to 50% of each approaching month. You expect to begin May with only 100 units on hand. Prepare a month -by-month purchases budget for May, June and July.
2. You want to attach 4 streamers (for the handle bars) to each unit when it arrives into your inventory. Your family manufactures the streamers as a separate business. Since there is little risk or lead time involved, a 10% inventory is all that is required at the beginning of each month. Budget purchases for the month of May and June. Beginning inventory for May us based upon this 10% calculation.
3. You also want to give two Pogo Sticks to each buyer (at the time a bike is sold).You want to maintain a 20% month-end-inventory based on the coming month's needs. Budget purchases for May and June for these Pogo Sticks. Beginning inventory for May is based upon this 20% calculation.
4. You are now going to budget for cash receipts for May, June and July. These things sell for $100 each and 40% are sold on credit. Credit sales are collected as follows: 50% in the month of sale, 30% in the following month, 16% in the second month following, ?% written off in the third month following the sale.