At January 1 2022 Deer Corp.has beginning inventory of 2000 surfboards.Deer estimates it will sell 10000 units during the first quarter of 2022 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 2022?

Question

Quizplus · Accepted Answer

1st quarter sales = 10,000
2nd quarter sales = 10,000 x 1.12 = 11,200
3rd quarter sales = 11,200 x 1.12 = 12,544

Ending inventory for 1st quarter = 25% x 11,200 = 2,800
Ending inventory for 2nd quarter = 25% x 12,544 = 3,136

Therefore, total surfboards needed for 3rd quarter = 12,544 + 3,136 - 2,800 = 12,880

Beginning inventory for 3rd quarter = 25% x 12,544 = 3,136

Total surfboards needed to be purchased = 12,880 - 3,136 = 9,744

Total sales revenue = 9,744 x $150 = $1,461,600

Thus, the budgeted sales revenue for the third quarter of 2022 is $1,881,600.