At January 1, 2020, Barry, Inc.has beginning inventory of 5,000 widgets.Barry estimates it will sell 40,000 units during the first quarter of 2020 with a 5% increase in sales each quarter.Barry's policy is to maintain an ending inventory equal to 10% of the next quarter's sales.Each widget costs $2 and is sold for $3.How much is budgeted sales revenue for the third quarter of 2020?
A)$44,100
B)$120,000
C)$132,300
D)$119,070

Question

Quizplus · Accepted Answer

To solve this problem, we need to calculate the number of units Barry plans to sell in each quarter, calculate how many units Barry plans to have in ending inventory at the end of each quarter, and calculate the cost of goods sold and sales revenue for each quarter.

First, let's calculate the number of units Barry plans to sell in each quarter:
- Q1: 40,000 units
- Q2: 40,000 * 1.05 = 42,000 units
- Q3: 42,000 * 1.05 = 44,100 units

Next, let's calculate how many units Barry plans to have in ending inventory at the end of each quarter:
- Q1: 10% of Q2 sales = 4,200 units
- Q2: 10% of Q3 sales = 4,410 units
- Q3: no ending inventory is needed since it is the end of the year

Now, let's calculate the cost of goods sold and sales revenue for each quarter:
- Q1:
Beginning inventory: 5,000 units
Sales: 40,000 units
Ending inventory: 4,200 units
Cost of goods sold: (5,000 + 40,000 - 4,200) * $2 = $82,600
Sales revenue: 40,000 units * $3 = $120,000
- Q2:
Beginning inventory: 4,200 units
Sales: 42,000 units
Ending inventory: 4,410 units
Cost of goods sold: (4,200 + 42,000 - 4,410) * $2 = $85,380
Sales revenue: 42,000 units * $3 = $126,000
- Q3:
Beginning inventory: 4,410 units
Sales: 44,100 units
Ending inventory: 0 units
Cost of goods sold: (4,410 + 44,100 - 0) * $2 = $97,020
Sales revenue: 44,100 units * $3 = $132,300

Therefore, the budgeted sales revenue for the third quarter of 2020 is $132,300. The answer is C.