Ecology Co. sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: 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

To calculate the units to be purchased in February, first determine the February sales and the desired ending inventory for February, which is 20% of March sales. Then, calculate the beginning inventory for February, which is the ending inventory from January. The formula is: Purchases = (February Sales + Ending Inventory for February) - Beginning Inventory for February.