At January 1, 2020, Ceatric, Inc.has beginning inventory of 10,000 boogie boards.Ceatric estimates it will sell 7,000 units during the first quarter of 2020 with a 7% increase in sales each quarter.Ceatric's policy is to maintain an ending inventory equal to 14% of the next quarter's sales.Each surfboard costs $95 and is sold for $130.How much is budgeted sales revenue for the third quarter of 2020?

Question

Quizplus · Accepted Answer

First, we need to calculate the number of boogie boards that need to be produced and sold in each quarter:

- Q1: 7,000 units
- Q2: 7,490 units (7% increase from Q1)
- Q3: 8,036.3 units (7% increase from Q2)
- Q4: 8,640.9 units (7% increase from Q3)

Next, we can calculate the ending inventory for each quarter:

- Q1: 7,000 x 0.14 = 980 units
- Q2: 7,490 x 0.14 = 1,048.6 units
- Q3: 8,036.3 x 0.14 = 1,125.87 units

Since Ceatric wants to maintain ending inventory equal to 14% of the next quarter's sales, Q3's ending inventory will be the beginning inventory for Q4.

- Q4: 8,640.9 + 1,125.87 - 7,490 = 2,276.77 units

Now, we can calculate the total number of units that need to be produced and sold in 2020:

- Total: 7,000 + 7,490 + 8,036.3 + 8,640.9 - 10,000 = 21,167.2 units

Finally, we can calculate the budgeted sales revenue for the third quarter:

- Q3 sales revenue = 8,036.3 x $130 = $1,044,319

Therefore, the best choice is C, $1,041,859.