Spicer Industries prepares budgets to help manage the company. Spicer is budgeting for the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017, inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects cost of goods sold to increase by 12%. The company budgets next year’s ending inventory at $1,800 million.

Requirement

1. One of the most important decisions a manager makes is how much inventory to buy. How much inventory should Spicer purchase during the upcoming year to reach its budget?