Real World Application
Purchasing Math
Production Costs and Profit Assume you are a gift store manager and you are completing the
merchandise plan entries for the month of December. Last year's December sales totaled $112,000. You
are projecting a 3 percent increase in sales for this year. During the month of December, you usually
maintain a 3:1 stock-to-sales ratio. Last year's reductions were $7,000. This year you hope to reduce
that amount by 5 percent. Assume an end-of-the-month (EOM) stock figure for December of $250,000.
Directions Follow these steps to determine how profit changes when the production cost varies.
Then answer the questions below.
