Exhibit 9-1
Sporting Inc.is a distributor which sells one product for $100 per unit.Sporting pays $60 to buy the product.In addition,fixed costs total $60,000 per month.Sporting wishes to maintain an inventory at the end of each month equal to 30% of the next month's projected sales.Purchases are paid in the month after purchase.
Sporting makes all sales on credit and collects 40% in the month of sale and 60% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
$\begin{array}{ll}
\text { January } & 10,000 \text { units } \
\text { February } & 15,000 \text { units } \
\text { March } & 18,000 \text { units } \
\text { April } & 20,000 \text { units } \
\text { May } & 16,000 \text { units }
\end{array}$
-Refer to Exhibit 9-1.What dollar amount of merchandise inventory will be purchased in April?
A)$1,848,000
B)$552,000
C)$1,272,000
D)$1,128,000
E)None of the answer choices is correct.

Question

Exhibit 9-1
Sporting Inc.is a distributor which sells one product for $100 per unit.Sporting pays $60 to buy the product.In addition,fixed costs total $60,000 per month.Sporting wishes to maintain an inventory at the end of each month equal to 30% of the next month's projected sales.Purchases are paid in the month after purchase.
Sporting makes all sales on credit and collects 40% in the month of sale and 60% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
 $\begin{array}{ll}
\text { January } & 10,000 \text { units } \
\text { February } & 15,000 \text { units } \
\text { March } & 18,000 \text { units } \
\text { April } & 20,000 \text { units } \
\text { May } & 16,000 \text { units }
\end{array}$
-Refer to Exhibit 9-1.What dollar amount of merchandise inventory will be purchased in April?
A)$1,848,000
B)$552,000
C)$1,272,000
D)$1,128,000
E)None of the answer choices is correct.

Quizplus · Accepted Answer

To calculate the dollar amount of merchandise inventory to be purchased in April, we first determine the desired ending inventory for April, which is 30% of May's projected sales (16,000 units). Thus, the desired ending inventory for April is 16,000 units * 30% = 4,800 units. The total needed inventory for April is the sum of April's projected sales (20,000 units) and the desired ending inventory for April (4,800 units), totaling 24,800 units. Since the beginning inventory for April is the desired ending inventory for March (30% of April's projected sales, which is 20,000 units * 30% = 6,000 units), we subtract this from the total needed inventory to find the amount to be purchased: 24,800 units - 6,000 units = 18,800 units. At $60 per unit, the dollar amount for merchandise to be purchased in April is 18,800 units * $60 = $1,128,000.

Exhibit 9-1 Sporting Inc -Refer to Exhibit 9-1

Exhibit 9-1
Sporting Inc -Refer to Exhibit 9-1