3.13 Jodie is a wholesaler of electrical discount goods. She buys in end-of-line and seconds quality goods from manufacturers and sells them on to small electrical retailers. She has to take advantage immediately of any special offers that manufacturers make available; if she doesn’t the manufacturers will sell to one of her competitors. Therefore, her inventory levels can fluctuate substantially from one week to the next. The level of revenue is not steady from month-to-month; it depends upon what’s in inventory and whether there is much demand for the items Jodie currently has in her warehouse.

At the beginning of March Jodie’s inventory was valued at £93 882 and comprised principally kettles, toasters and dishwashers. An unexpected surge in demand by small retail wholesalers for these items resulted in a high level of sales in March of £89 907. By the end of March inventory dropped to £34 920. At the end of April, as the result of a special purchase of electric blankets it went up to £82 860 dropping back only slightly to £75 918 at the end of May. Jodie knows that she will find it difficult to dispose of most of this inventory before the end of the summer.

Revenue for April was £31 241 and for May, £40 270.

Purchases for each of the 3 months were:

March £3 074 April £65 747 May £18 911

a) Draw up trading accounts for each of the 3 months.

b) Discuss the business and financial problems Jodie would encounter in running this type of wholesaler operation.