Question
Kegglers Supply is a merchandiser of three different products. The companys February 28 inventories are footwear, 20,000 units; sports equipment, 80,000 units; and apparel, 50,000
Kegglers Supply is a merchandiser of three different products. The companys February 28 inventories are footwear, 20,000 units; sports equipment, 80,000 units; and apparel, 50,000 units. Management believes that excessive inventories have accumulated for all three products. As a result, a new policy dictates that ending inventory in any month should equal 30% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.
Budgeted Sales in Units
March April May June
Footwear. 15,000 25,000 32,000 35,000
Sports Equipment 70,000 90,000 95,000 90,000
Apparel 40,000 38,000 37,000 25,000
Required
1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.
2. The purchases budgets in part 1 should reflect fewer purchases of all three products in March compared to those in April and May. What factor caused fewer purchases to be planned? Suggest business conditions that would cause this factor to both occur and impact the company in this way.
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