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 2011,sales were as follows:
Inventory at the end of 2011 is $15,000.
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 2011 to 2012. Javier believes that quarterly sales will grow by 10 percent in 2012 compared to the corresponding quarter in 2011, and sales in the first quarter of 2013 will be 10 percent higher than in 2012. 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. Javier is tentatively planning to have ending inventory equal to 20 percent of the amount needed to meet the next quarter's sales. He would also like to explore the effect on purchases of alternative rates. Thus, your spread-sheet 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 30 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 2012 for the following combinations:
Combination 1 Sales growth of 10 percent, ending inventory of 22 percent, cost of goods sold of 33 percent
Combination 2 Sales growth of 15 percent, ending inventory of 24 percent, cost of goods sold of 28 percent
Combination 3 Sales growth of 9 percent, ending inventory of 34 percent, cost of goods sold of 40 percent