Problem

Lakeside Components wishes to purchase parts in one month for sale in the next. On May 31, the company has 12,000 parts in stock, although sales for the next month (June) are estimated to total 10,200 parts. Total sales of parts are expected to be 11,900 in July and 14,500 in August.

Parts are purchased at a wholesale price of $25. The supplier has a financing arrangement by which Lakeside Components pays 50 percent of the purchase price in the month when the parts are delivered and 50 percent in the following month. Lakeside purchased 12,000 parts in May.

Required:

a. Estimate purchases (in units) for June and July.

b. Estimate the cash required to make purchases in June and July.