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4. Peak months for sales correspond with gift-giving holidays. History shows that January. March, May and June are the slowest months with only 1%
4. Peak months for sales correspond with gift-giving holidays. History shows that January. March, May and June are the slowest months with only 1% of sales for each month. Sales pick up over the summer with July. August and September each contributing 2% to the total. Valentines Day in February boosts sales to 5%, and Easter in April accounts for 10%. As Christmas shopping picks up momentum. winter sales start at 15% In October, move to 20% in November and then peak at 40% in December. This pattern of sales is not expected to change in the next tino From previous experience, management has determined that an ending inventory equal to 25% of the next month's sales is required to fit the buyer's demands. Because sales are seasonal, GGC Inc. must rent an additional storage facility from September to December to house the additional inventory on hand. The only related cost is a flat $20,000 per month, payable at the beginning of the month. There is only one type of raw material used in the production of the diplomas. Space-age paper (SAP) is a very light-weight material that is purchased in reams and then bound together. Each diploma requires 5 pounds of SAP, at a cost of $0.45 per pound. The supplier of SAP tends to be somewhat erratic so GGC, Inc. finds it necessary to maintain an inventory balance equal to 40% of the following month's production needs asa precaution against stock-outs. GGC, Inc. pays for of a month's purchases in the month of purchase, 45% in the following month and the remaining 35% two months after the month of purchase. There is no early payment discount. Beginning accounts payable will consist of $208,406.50 arising from the following estimated direct material purchases for November and December of 2016:
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