I

Practice Problems Exercise 8.5

1. Develop a merchandise plan on the basis of the information that follows. Sales for the six-month
spring-summer season have been planned to total $650,000. Reductions for the total season are to be 22%
of planned sales, and season's turnover should be l.9. BOM inventory values are to be planned by the basic
stock method. In this problem, ending inventory will be the same as the average inventory. (A merchandise
plan form is provided to complete the problem.)
%of
Month

%of

Seasons Sales

Seasons Reductions

February

15.5

15

March

17.5

12

April

19.0

19

May

18.0

16

June

15.5

18

July

14.5

20

(a) Total sales for the season are $650,000. Determine sales for each month.
(b) Calculate total $ reductions and allocate reductions to each month on the basis of the percentages
given.
(c) Using the basic stock method, calculate BOM inventory values for each month.
(d) Enter the EOM inventory values on the form. July's ending inventory has been given as the average
inventory.
(e) Calculate planned purcbases at retail.
(f) Calculate initial markup percent needed, given the following information:
22.0%

Reductions
Operating

expenses

34.0%

Profit desired

7.5%

Alteration

0.5%

costs

Cash discounts

1.6%

2. Using the merchandise plan completed in Problem 1, calculate stock-sales ratios for each month.

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