Chapter 10, Problems #13

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Javier Andreas is in the process of developing a spreadsheet to budget annual sales and purchases of inventory for his company, The Backyard Place, a retail store that sells lighting, furniture, and other amenities for the backyard. In 2017, sales were as follows:

The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...

Inventory at the end of 2017 is $27,800.

Required

Help Javier build a spreadsheet that will allow him to examine the impact on purchases of inventory of the following three items:

1. Sales growth from 2017 to 2018. Javier believes that quarterly sales will grow by 8 percent in

2018 compared to the corresponding quarter in 2017, and sales in the first quarter of 2019 will be 8 percent higher than in the corresponding quarter in 2018. However, he would also like to explore the effect on purchases of alternative growth rates. Thus, your spreadsheet must allow you to change this value and observe the effect on all other values.

2. Inventory on hand at the end of each quarter for 2018. Javier is tentatively planning to have ending inventory equal to 15 percent of the cost of sales needed for the next quarter. He would also like to explore the effect on purchases of alternative rates. Thus, your spreadsheet must allow you to change this value and observe the effect on purchases.

3. Cost of goods sold. Javier estimates that cost of goods sold as a percent of sales will be 35 percent. He would also like to explore the effect on purchases of different rates. Thus, your spreadsheet must allow you to change this value. After you have developed your spreadsheet, calculate purchases in the first quarter through the fourth quarter of 2018 for the following combinations:

Combination 1-Sales growth of 10 percent, ending inventory of 22 percent of next quarter's cost of goods sold, cost of goods sold of 33 percent of current quarter's projected sales

Combination 2-Sales growth of 15 percent, ending inventory of 24 percent of next quarter's cost of goods sold, cost of goods sold of 28 percent of current quarter's projected sales

Combination 3-Sales growth of 9 percent, ending inventory of 34 percent of next quarter's cost of goods sold, cost of goods sold of 40 percent of current quarter's projected sales

The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...