General Ltd. manufactures boxes. The estimated number of boxes sold for the first three months of 2001 are: Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Ltd. expects to sell the boxes for £5 each. April 2004 sales is projected at 4,500 boxes.
What is the expected sales amount for March?

A) £15,000
B) £21,000
C) £19,500
D) £4,500

Question

General Ltd. manufactures boxes. The estimated number of boxes sold for the first three months of 2001 are: Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Ltd. expects to sell the boxes for £5 each. April 2004 sales is projected at 4,500 boxes.
What is the expected sales amount for March?

A) £15,000 
B) £21,000 
C) £19,500 
D) £4,500

Quizplus · Accepted Answer

First, we need to calculate the expected sales for January, February, and March.

- December 31, 2000 finished goods inventory: 900 units 
- January expected sales: (1 - 0.2) x 800 = 640 units 
- January production: 640 units 
- January ending inventory: 640 x 0.2 = 128 units 
- January COGS: 640 - 128 = 512 units 
- February expected sales: (1 - 0.2) x 1,000 = 800 units 
- February production: 800 + 128 = 928 units 
- February ending inventory: 800 x 0.2 = 160 units 
- February COGS: 800 - 160 = 640 units 
- March expected sales: (1 - 0.2) x 1,200 = 960 units 
- March production: 960 + 160 = 1,120 units 
- March ending inventory: 960 x 0.2 = 192 units 
- March COGS: 960 - 192 = 768 units

Total expected sales for January, February, and March:

- 640 + 800 + 960 = 2,400 units 
- Sales revenue: 2,400 x £5 = £12,000

Therefore, the expected sales amount for March is £19,500 (2,400 units x £5 per unit - £12,000 for January and February sales)