which of the three inventory policies a company should choose?

Ending Inventory should equal ___ of next months projected sales a. 50% b. 90% or c. 5%

Please explain. Thank you!

Prepare the following budgets for a retail company on a computer spreadsheet such as Excel. Follow the format of the budgets shown in chapter 9 of your textbook. Your name, student ID #, and section number should appear on each page. The budgets should be in good format meaning should have proper labels, titles and a budget should fit on one page and not have a page break in the middle. 1. Prepare a sales budget for January through May. The selling price per unit is $40.00. Use the last five digits of your student identification number to fill in the blanks on the budgeted sales in units. If your number contains a 0 use 10 instead. For example, if the last five digits in your student ID number are 14607, the budgeted sales in units would be: December of the previous year 10000 January February March April 40,000 60,000 100,000 20,000 2. Prepare a purchases budget for January through March, and the first quarter in total. Assume that the company only sells one product that can be purchased at S25.00 per unit. The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next month's projected sales. 3. Prepare a cash budget for January through March and for the first quarter in total. The company maintains a minimum cash balance of $50,000.00, and this was the balance in the cash account on January 1. Past experience shows that 30% of sales are collected in the month of the sale, and 70% in the month following the sale. Labor cost is $15 per unit sold. Other expenses include $35,000 per month for rent, $14,000 for advertising, and $16,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following purchase (i.c. January purchases are paid in February). The company has an open line of credit with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month when borrowing is needed and repayments are made at the end of a month when there is enough cash to make the payment. Also, interest is only paid at the time when a repayment is made Additionally, all loans and repayments (not the interest portion) can only be made in increments of $1000 and the company would like to pay its debts, or a portion thereof, as soon as it has enough cash to do so 4. Prepare the Budgeted Income Statement based on the information given above. Label this budget scenario as A., 5. Repeat steps 2-4 for budget scenarios B and C using the following Desired Ending Inventory assumptions: 6. Write a brief analysis of the three inventory policies and explain which policy the company should choose. Your write-up should include a discussion of the results you obtained from the analyses above and should be in the form of a one-page Memo to the President of the company (make up a name). Assume that you are writing on behalf of a financial consultant advising the President about the company's inventory policies. Organization grammar, and spelling are important. 7. Print out your spreadsheet 'formula sheet' and upload it along with the project