(Learning Objective 5: Use the COGS model to make management decisions)Spicer Industries prepares budgets to help manage the company. Spicer is budgeting forthe fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017,sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017,inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects costof goods sold to increase by 12%. The company budgets next year’s ending inventory at$1,800 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should Spicer purchase during the upcoming year to reach its budget?

Question

(Learning Objective 5: Use the COGS model to make management decisions)
Spicer Industries prepares budgets to help manage the company. Spicer is budgeting for
the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017,
sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017,
inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects cost
of goods sold to increase by 12%. The company budgets next year’s ending inventory at
$1,800 million.
Requirement
1. One of the most important decisions a manager makes is how much inventory to buy. How
much inventory should Spicer purchase during the upcoming year to reach its budget?

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