The following forecasted sales pertain to Shankar Company: $$\begin{array} { l l }
\text { Month } & \text { Sales } \
\text { May } & \$ 200,000 \
\text { June } & 250,000 \
\text { July } & 150,000 \
\text { August } & 100,000
\end{array}$$ Finished goods inventory as of April 30
4,000 units
The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 30 percent of the next month's sales.
What is the budgeted beginning balance in units for finished goods inventory on July 1?
A)4,000 units
B)3,500 units
C)5,500 units
D)4,500 units

Question

The following forecasted sales pertain to Shankar Company: $$\begin{array} { l l } 
\text { Month } & \text { Sales } \
\text { May } & \$ 200,000 \
\text { June } & 250,000 \
\text { July } & 150,000 \
\text { August } & 100,000
\end{array}$$ Finished goods inventory as of April 30
4,000 units
The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 30 percent of the next month's sales.
What is the budgeted beginning balance in units for finished goods inventory on July 1?
A)4,000 units
B)3,500 units
C)5,500 units
D)4,500 units

Quizplus · Accepted Answer

To calculate the budgeted beginning balance in units for July 1, we first determine the required ending inventory for June, as it becomes the beginning inventory for July. June's sales are forecasted at $250,000, and at a selling price of $10 per unit, this translates to 25,000 units (250,000 / 10). The company aims to maintain ending inventories equal to 30% of the next month's sales, which in July are forecasted at $150,000 or 15,000 units (150,000 / 10). Therefore, the ending inventory for June (beginning inventory for July) should be 30% of 15,000 units, which is 4,500 units (15,000 * 0.30).

The Following Forecasted Sales Pertain to Shankar Company Finished Goods Inventory as of April 30 4,000 Units the

The Following Forecasted Sales Pertain to Shankar Company Finished Goods Inventory as of April 30
4,000 Units
the