Figure 8-2 Oriental Lamp Company manufactures lamps.The estimated number of lamp sales for the last three months of 2011 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.Oriental Lamp expects to sell the lamps for $25 each.January 2011 sales is projected at 16,000 lamps.
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Refer to Figure 8-2.What is the expected sales revenue for December?

Question

Figure 8-2 Oriental Lamp Company manufactures lamps.The estimated number of lamp sales for the last three months of 2011 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.Oriental Lamp expects to sell the lamps for $25 each.January 2011 sales is projected at 16,000 lamps.
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Refer to Figure 8-2.What is the expected sales revenue for December?

Quizplus · Accepted Answer

To find December's expected sales revenue, we need to first calculate the budgeted sales for December:
Budgeted sales for December = Budgeted ending inventory for December / 0.25
We know that the estimated number of lamp sales for January is 16,000, so the budgeted ending inventory for December would be: 
Budgeted ending inventory for December = 16,000 * 0.25 = 4,000 lamps
Therefore, the budgeted sales for December would be: 
Budgeted sales for December = 4,000 lamps
Total expected sales revenue for December = Budgeted sales for December * Selling price per lamp
Total expected sales revenue for December = 4,000 * $25 = $100,000
Thus the correct choice is C.

Figure 8-2 Oriental Lamp Company Manufactures Lamps