Lakeside Components wishes to purchase parts in one month for sale in the next.
ID: 2597842 • Letter: L
Question
Lakeside Components wishes to purchase parts in one month for sale in the next. On May 31, the company has 12,000 parts in stock, although sales for the next month (June) are estimated to total 11,000 parts. Total sales of parts are expected to be 13,100 in July and 14,900 in August.
Parts are purchased at a wholesale price of $15. The supplier has a financing arrangement by which Lakeside Components pays 60 percent of the purchase price in the month when the parts are delivered and 40 percent in the following month. Lakeside purchased 14,000 parts in May.
Required:
a. Estimate purchases (in units) for June and July.
b. Estimate the cash required to make purchases in June and July.
Explanation / Answer
Answer a
Computation of Estimated Purchase (units)
Answer b
Cash required to make purchases in June
= 60 % of the purchase made in june + 40 % of the purchase made in may
= (12,100 * $15 * 60 %) + ( 14,000 * $15 * 40 %) = $108,900 + $84,000 = $192,900
Cash required to make purchases in July
= 60 % of the purchase made in july + 40 % of the purchase made in june
= (14,900 * $15 * 60 %) + ( 12,100 * $15 * 40 %) = $134,100 + $72,600 = $206,700
Deatils June July Estimated Sales in units 11,000 13,100 Add : Ending Inventory ( estimated sales in next month) 13,100 14,900 Total units needed 24,100 28,000 Less : Beginning Inventory ( ie ending inventory of previous month) (12,000) (13,100) Estimated Purchase (units) 12,100 14,900Related Questions
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