At January 1, 2016, Barry, Inc.has beginning inventory of 5,000 widgets.Barry estimates it will sell 40,000 units during the first quarter of 2016 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 2016?
A)$44,100
B)$120,000
C)$132,300
D)$119,070

Question

Quizplus · Accepted Answer

First, we need to calculate the sales for each quarter:

Q1 Sales: 40,000 units
Q2 Sales: 40,000 x 1.05 = 42,000 units
Q3 Sales: 42,000 x 1.05 = 44,100 units

Next, we need to calculate the ending inventory for each quarter:

Q1 Ending Inventory: 10% of Q2 sales = 4,200 units
Q2 Ending Inventory: 10% of Q3 sales = 4,410 units
Q3 Ending Inventory: 10% of Q4 sales = 0 units (since this is the final quarter)

Now we can calculate the total units needed for each quarter:

Q1 Total Units Needed: 40,000 + 4,200 - 5,000 = 39,200 units
Q2 Total Units Needed: 42,000 + 4,410 - 4,200 = 42,210 units
Q3 Total Units Needed: 44,100 + 0 - 4,410 = 39,690 units

Finally, we can calculate the budgeted sales revenue for Q3:

Q3 Sales Revenue = Q3 Total Units Needed x Selling Price
Q3 Sales Revenue = 39,690 units x $3 = $119,070

Therefore, the correct answer is C) $132,300.