A retailer using the basic stock method wants its basic stock to equal 15 percent of its 2017 average monthly sales.Yearly sales for 2017 are forecast at $3,000,000.Planned sales for January 2017 are $400,000.What is the January 1,2017 planned inventory value (at retail),using the basic stock method?

Question

Quizplus · Accepted Answer

The basic stock equals 15% of the 2017 average monthly sales, which can be calculated by dividing the yearly forecasted sales by 12 months: 
$3,000,000 / 12 = $250,000 (average monthly sales)
Therefore, the basic stock is 15% x $250,000 = $37,500.
To find the planned inventory value (at retail) for January 1, 2017, we need to add the basic stock to the planned sales for January: 
$37,500 + $400,000 = $437,500 (planned inventory value at retail)
Therefore, the best choice is B.

A Retailer Using the Basic Stock Method Wants Its Basic