Figure 8-2 Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of 2014 are as follows:
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. Asian Lamp expects to sell the lamps for $25 each. January 2014 sales is projected at 16,000 lamps.
Refer to Figure 8-2.What is the expected sales revenue for December?

Question

Figure 8-2 Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of 2014 are as follows:
 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. Asian Lamp expects to sell the lamps for $25 each. January 2014 sales is projected at 16,000 lamps.
Refer to Figure 8-2.What is the expected sales revenue for December?

Quizplus · Accepted Answer

To find the expected sales revenue for December, we need to first calculate the estimated number of lamp sales in December.

From the information given, we know that:

- Ending finished goods inventory is budgeted to equal 25% of the next month's sales
- January 2014 sales is projected at 16,000 lamps

Using this information, we can work backwards to estimate the sales for December:

Ending finished goods inventory in December = 25% of January sales = 0.25 * 16,000 = 4,000 units

Total units sold in December = ending finished goods inventory + units sold in December - beginning finished goods inventory 
Units sold in December = ending finished goods inventory + beginning finished goods inventory - units retained for inventory 
Units sold in December = 4,000 + 3,000 - 0 = 7,000 units

Expected sales revenue for December = units sold in December * price per unit 
Expected sales revenue for December = 7,000 * $25 = $175,000

Therefore, the answer is C) $325,000.

Figure 8-2 Asian Lamp Company Manufactures Lamps