Frolic Corporation has budgeted sales and production over the next quarter as follows: The company has 17,500 units of product on hand at July 1.25% of the next month's sales in units should be on hand at the end of each month.October sales are expected to be 97,000 units.Budgeted sales for September would be (in units) :

A) 88,000
B) 90,000
C) 86,000
D) 84,000

Question

Frolic Corporation has budgeted sales and production over the next quarter as follows:

The company has 17,500 units of product on hand at July 1.25% of the next month's sales in units should be on hand at the end of each month.October sales are expected to be 97,000 units.Budgeted sales for September would be (in units) :

A) 88,000
B) 90,000
C) 86,000
D) 84,000

Kristy Benvenuti · Accepted Answer

Final Answer : B, Explanation :  To determine the budgeted sales for September, we need to calculate the desired ending inventory for October:October Ending Inventory: 0.25 x 97,000 = 24,250We then need to adjust for the beginning inventory on July 1:Adjusted October Ending Inventory: 24,250 - 17,500 = 6,750The units produced during September will need to cover both the units sold in September and the desired ending inventory for October:September Production Required: 80,000 + 6,750 = 86,750Therefore, the budgeted sales for September would be:September Sales = September Production Required - Beginning InventorySeptember Sales = 86,750 - 13,600September Sales = 73,150So, the best choice is B.   83,000 + 0.25X - 20,750 = 84,7500.25X = 22,500X = 90,000or24,250 + X - 0.25X = 91,7500.75X = 67,500X = 90,000

Definitions

Learning Objectives

Learning Objectives

Related questions