Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 22

Estimate Purchases and Cash Disbursements

Westile Company buys plain ceramic tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months’ sales. The tiles cost $2 each and must be paid for in cash. The company has 56,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months:

January	24,800
February	35,600
March	26,400
April	28,400
May	19,200
June	14,400

Required

a. Estimate purchases (in units) for January, February, and March.

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b. Estimate cash required to make purchases in January, February, and March.

Step 1 of 10

Merchandising business:

They are involved in buying and selling of goods or products. These companies will sell to retail customers. The main earnings to this type of companies the difference between the bought in price and selling price of the products.