At January 1 2016 Deer Corp. has beginning inventory of 2000 surfboards. Deer estimates it will sell 10000 units during the first quarter of 2016 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2016?

A) $450000
B) $1950000
C) $1881600
D) $12544

Question

savannah martin · Accepted Answer

Final Answer : C, Explanation :  1. First Quarter Sales:Beginning Inventory: 2000Sales: 10,000Ending Inventory: (25% of next quarter's sales): 3,000Total Units Needed: 10,000 + 3,000 - 2,000 = 11,000Total Sales Revenue: 10,000 x $150 = $1,500,0002. Second Quarter Sales:Beginning Inventory: 3,000Sales: 10,000 x 1.12 = 11,200Ending Inventory: (25% of next quarter's sales): 2,800Total Units Needed: 11,200 + 2,800 - 3,000 = 10,000Total Sales Revenue: 11,200 x $150 = $1,680,0003. Third Quarter Sales:Beginning Inventory: 2,800Sales: 11,200 x 1.12 = 12,544Ending Inventory: (25% of next quarter's sales): 3,136Total Units Needed: 12,544 + 3,136 - 2,800 = 13,880Total Sales Revenue: 12,544 x $150 = $1,881,600Therefore, the answer is C, $1,881,600.

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