Oriental Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of the current year is as follows:
$$\begin{array} { l l }
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units.Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales.Oriental Lamp expects to sell the lamps for $25 each.January of the following year sales is projected at 16,000 lamps.
-Refer to the figure .What is the expected sales revenue for December?

Question

Oriental Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of the current year is as follows:
$$\begin{array} { l l } 
\text { Month } & \text { Sales } \
\hline \text { October } & 10,000 \
\text { November } & 14,000 \
\text { December } & 13,000
\end{array}$$ Finished goods inventory at the end of September was 3,000 units.Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales.Oriental Lamp expects to sell the lamps for $25 each.January of the following year sales is projected at 16,000 lamps.
-Refer to the figure .What is the expected sales revenue for December?

Quizplus · Accepted Answer

To calculate the expected sales revenue for December, we need to first determine the budgeted ending finished goods inventory for October.

Since the budgeted ending finished goods inventory is 25% of the next month's sales, the budgeted ending finished goods inventory for October would be:

25% x 16,000 lamps = 4,000 lamps

To determine the budgeted production for October, we need to add the budgeted ending finished goods inventory for October to the budgeted sales for October and then subtract the beginning finished goods inventory for October:

Budgeted production for October = Budgeted sales for October + Budgeted ending finished goods inventory for October - Beginning finished goods inventory for October 
                       = 16,000 lamps + 4,000 lamps - 3,000 lamps 
                       = 17,000 lamps

We can then calculate the budgeted sales revenue for December by determining the number of lamps expected to be sold in December (which is the budgeted production for November since there is no ending finished goods inventory for November), and multiplying it by the expected selling price of $25 per lamp:

Budgeted sales revenue for December = Budgeted production for November x Expected selling price per lamp 
                               = 17,000 lamps x $25 per lamp 
                               = $425,000

Therefore, the expected sales revenue for December is C) $325,000.

Oriental Lamp Company Manufactures Lamps Finished Goods Inventory at the End of September Was 3,000