Budgeted sales for the first six months for Wardrope Corp. are listed below: Wardrope Corp. has a policy of maintaining an inventory of finished goods equal to 40 percent of the next month's budgeted sales. If Wardrope Corp. plans to produce 6,000 units in June, what are budgeted sales for July?

Question

Budgeted sales for the first six months for Wardrope Corp. are listed below:  Wardrope Corp. has a policy of maintaining an inventory of finished goods equal to 40 percent of the next month's budgeted sales. If Wardrope Corp. plans to produce 6,000 units in June, what are budgeted sales for July?

Quizplus · Accepted Answer

To find the budgeted sales for July, we need to first determine the desired inventory level for July. Since Wardrope Corp. maintains an inventory of finished goods equal to 40 percent of the next month's budgeted sales, the desired inventory level for July is:

0.4 x (budgeted sales for August) = 0.4 x 12,000 = 4,800 units

Next, we need to calculate the total sales for July and August in order to determine the budgeted sales for July. We can do this by using the sales and production figures provided in the question and applying the given production and sales lag times:

Budgeted Sales for July + Budgeted Sales for August = Sales in July + Sales in August
Budgeted Sales for August = 12,000 (Given)
Production in July = Budgeted Sales for July ÷ 0.6 (Since production is 60% of sales)
Production in August = Budgeted Sales for August ÷ 0.6
Sales in July = Production in August (40% of July's production is required for August's inventory)
Sales in August = Budgeted Sales for August

Substituting the given and calculated values, we get:

Budgeted Sales for July + 12,000 = Production in August + 12,000
Budgeted Sales for July + 12,000 = (Budgeted Sales for August ÷ 0.6) + 12,000
Budgeted Sales for July + 12,000 = 20,000 + 12,000
Budgeted Sales for July = 9,000 units

Therefore, Choice C (9,000 units) is the correct answer.

Budgeted Sales for the First Six Months for Wardrope Corp