Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 35

Keggler's Supply is a merchandiser of three different products. The company's 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.

Required
1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.
Analysis Component
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.