Based on the July BOMI, Sales, and COGS data, what is the open-to-buy amount for July?

Based on the July BOMI, Sales, and COGS data, what is the open-to-buy amount for July?

• A. $10,000
• B. $15,000
• C. $20,000
• D. $5,000

Answer: (D)

Open-to-buy is the amount you still have available to spend on new inventory in the month to meet forecasted sales without overstocking. It ties together what you already have (BOMI) with how much you expect to sell (Sales) and what that selling will cost (COGS). The idea is to ensure you can cover the month’s projected demand while ending the month with your target level of stock. In this context, you compare the stock you start with (BOMI) to what the July data implies you need to fulfill July sales (reflected by Sales and the associated COGS). If BOMI plus the inventory you plan to bring in is just enough to cover the July sales at their COGS, the remaining budget for new purchases—the open-to-buy—will be small. If July’s forecast calls for more stock than BOMI and current receipts can support, the open-to-buy increases to fund that additional purchase. The result shown, five thousand dollars, means that after applying the July BOMI, projected Sales, and COGS, you have five thousand dollars left in your July buying budget to place additional orders to meet forecasted demand without overshooting your planned ending inventory.

Open-to-buy is the amount you still have available to spend on new inventory in the month to meet forecasted sales without overstocking. It ties together what you already have (BOMI) with how much you expect to sell (Sales) and what that selling will cost (COGS). The idea is to ensure you can cover the month’s projected demand while ending the month with your target level of stock.

In this context, you compare the stock you start with (BOMI) to what the July data implies you need to fulfill July sales (reflected by Sales and the associated COGS). If BOMI plus the inventory you plan to bring in is just enough to cover the July sales at their COGS, the remaining budget for new purchases—the open-to-buy—will be small. If July’s forecast calls for more stock than BOMI and current receipts can support, the open-to-buy increases to fund that additional purchase. The result shown, five thousand dollars, means that after applying the July BOMI, projected Sales, and COGS, you have five thousand dollars left in your July buying budget to place additional orders to meet forecasted demand without overshooting your planned ending inventory.