Question 8

Refer to Exhibit 9-2. What dollar amount of merchandise inventory will be purchased in March?

a)		$957,000
b)		$940,500
c)		$1,452,000
d)		$1,023,000
e)		None of the answer choices is correct.

Exhibit 9-2 Bowline Inc. is a distributor which sells one product for $60 per unit. Bowline pays $33 to buy the product. In addition, fixed costs total $42,000 per month. Bowline wishes to maintain an inventory at the end of each month equal to 25% of the next month's projected sales. Purchases are paid in the month after purchase. Bowline makes all sales on credit and collects 30% in the month of sale and 70% in the month after sale. Budgeted monthly sales in units for the first five months of 2013 are as follows: January February March April May 20,000 units 25,000 units 28.000 units 30.000 units 26,000 units