Tannwin Co.sells a new product called Accountomatic and has predicted the following sales for the first four months of the current year:
$\begin{array}{ccccc}
& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \
\text { Sales in units } & 1,700 & 1,900 & 2,100 & 1,600
\end{array}$

Ending inventory for each month should be 20% of the next month's sales,and the prior December 31 inventory is consistent with that policy.How many units should be purchased in the first quarter of the year?
A) 5,100
B) 5,680
C) 6,300
D) 6,000
E) 5,700

Question

Tannwin Co.sells a new product called Accountomatic and has predicted the following sales for the first four months of the current year:
$\begin{array}{ccccc} 
& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \
\text { Sales in units } & 1,700 & 1,900 & 2,100 & 1,600
\end{array}$

Ending inventory for each month should be 20% of the next month's sales,and the prior December 31 inventory is consistent with that policy.How many units should be purchased in the first quarter of the year?
A) 5,100
B) 5,680
C) 6,300
D) 6,000
E) 5,700

Quizplus · Accepted Answer

To calculate the units to be purchased, calculate the desired ending inventory for each month and add the sales for each month, then subtract the beginning inventory. Ending inventory for March is 20% of April sales (320 units). Total units needed for the first quarter = (1,700 + 1,900 + 2,100) + (380 + 420 + 320) - 340 = 5,680 units.

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