White Products wishes to purchase goods in one month for sale in the next. On Ma

Question

White Products wishes to purchase goods in one month for sale in the next. On March 31, the company has 25,000 portable music players in stock, although sales for the next month (April) are estimated to total 26,200 players. Total sales of players are expected to be 20,700 in May and 22,800 in June. Portable music players are purchased at a wholesale price of $85. The supplier has a financing arrangement by which White Products pays 60 percent of the purchase price in the month when the players are delivered and 40 percent in the following month. White purchased 28,000 players in March. Required: Estimate purchases (in units) for April and May. Estimate the cash required to make purchases in April and May.

Explanation / Answer

Answer 1 Mechandise to be purchased in April = 21900 units Answer 2 April May Cash required for the purchase in the month      2,068,900             1,907,400 Working Note Particulars March April May june Stock        25,000 Sales (Units)                               26,200            20,700 22800 Purchase (Units)        28,000                               21,900            22,800 20700 May month+ 1200 Current 60% Current Month purchase to be paid (Units)        16,800                               13,140            13,680 40% in the following month (Units)                               11,200              8,760 9120 Total units                               24,340            22,440 Cash Required for payment towards purchases                         2,068,900      1,907,400

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