Dawson Drums prepares budgets to help manage the company. Dawson Drums is budgeting for the fiscal year ended January 31, 2014. During the preceding year ended January 31, 2013, sales totaled $9,400 million and cost of goods sold was $6,500 million. At January 31, 2013, inventory was $1,800 million. During the upcoming 2014 year, suppose Dawson Drums expects cost of goods sold to increase by 12%. Te company budgets next year’s ending inventory at $2,100 million.
1. One of the most important decisions a manager makes is how much inventory to buy. How much inventory should Dawson Drums purchase during the upcoming year to reach its budget?