Learning Objective 5: Use the COGS model to make management decisions) Super Toys prepares budgets to help manage the company. Super Toys is budgeting for the fiscal year ended January 31, 2012. During the preceding year ended January 31, 2011, sales totaled $9,500 million and cost of goods sold was $6,600 million. At January 31, 2011, inventory was $1,900 million. During the upcoming 2012 year, suppose Super Toys expects cost of goods sold to increase by 10%. The company budgets next year’s ending inventory at $2,200 million.
Requirement
1. One of the most important decisions a manager makes is how much inventory to buy. How much inventory should Super Toys purchase during the upcoming year to reach its budget?