At January 1, 2012, Barry, Inc.has beginning inventory of 5,000 widgets.Barry estimates it will sell 40,000 units during the first quarter of 2012 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 2012?

Question

Quizplus · Accepted Answer

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

- Q1: 40,000 units
- Q2: 40,000 x 1.05 = 42,000 units
- Q3: 42,000 x 1.05 = 44,100 units
- Q4: 44,100 x 1.05 = 46,305 units

Now we can calculate the ending inventory for each quarter:

- Q1: 40,000 x 10% = 4,000 units
- Q2: 42,000 x 10% = 4,200 units
- Q3: 44,100 x 10% = 4,410 units
- Q4: 46,305 x 10% = 4,631 units

Using the ending inventory, we can calculate the required purchases for each quarter:

- Q1: 4,000 + 5,000 - 0 = 9,000 units
- Q2: 4,200 + 4,000 - 5,000 = 3,200 units
- Q3: 4,410 + 4,200 - 4,000 = 4,610 units
- Q4: 4,631 + 4,410 - 4,200 = 4,841 units

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

- Q3: 44,100 x $3 = $132,300