Ecology Co.sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: $\begin{array}{lclrl}
& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \
\text { Sales in units } &1,700 & 1,900 & 2,100 & 1,600
\end{array}$ Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy.How many units should be purchased in February?
A)1,860
B)1,900
C)1,940
D)1,980
E)2,320

Question

Quizplus · Accepted Answer

First, we need to calculate the ending inventory for each month:

Jan. ending inventory = 20% of Feb. sales = 0.2 x 1,900 = 380
Feb. ending inventory = 20% of Mar. sales = 0.2 x 2,100 = 420
Mar. ending inventory = 20% of Apr. sales = 0.2 x 1,600 = 320
Apr. ending inventory = 20% of May sales (which is 0, since we only have data for four months)

Next, we need to calculate the total units needed for the year:

Total sales for the year = 1,700 + 1,900 + 2,100 + 1,600 = 7,300
Total units needed (including ending inventory) = 7,300 + 380 + 420 + 320 = 8,420

Finally, we can calculate the units to be purchased in February:

Units to purchase in Feb. = Feb. sales + Feb. ending inventory - Jan. ending inventory
Units to purchase in Feb. = 1,900 + 420 - 380 = 1,940

Therefore, the answer is (C) 1,940.

Ecology Co Ending Inventory for Each Month Should Be 20% of the the Following