At January 1, 2019, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2019 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2019?

Question

Quizplus · Accepted Answer

First, we need to calculate the number of surfboards to be sold in each quarter:
Q1: 10,000
Q2: 10,000 x 1.12 = 11,200
Q3: 11,200 x 1.12 = 12,544

Next, we need to calculate the ending inventory for each quarter:
Q1: 25% x 11,200 = 2,800
Q2: 25% x 12,544 = 3,136

Using these figures, we can calculate the number of surfboards to be produced in each quarter:
Q1: 10,000 + 2,800 - 2,000 = 10,800
Q2: 11,200 + 3,136 - 2,800 = 11,536
Q3: 12,544 + 3,136 - 3,136 = 12,544

Finally, we can calculate the budgeted sales revenue for the third quarter:
12,544 x $150 = $1,881,600

Therefore, the answer is choice C.