Question

Shoe Time Company has been in business since 2 years and sells 5,000 pairs of shoes each month. The company wants to maintain an ending inventory equal to 25 percent of its next month's sales. If Shoe Time anticipates its recent advertising campaign will increase monthly sales by 20%, what is the new budgeted monthly ending inventory balance?

Answer 1

1,500 pairs of shoes

Step-by-step explanation:

Present sales: 5,000 pairs of shoes

If Shoe Time anticipates its recent advertising campaign will increase monthly sales by 20%, future sales= 5,000*1,20= 6,000 pairs of shoes.

If Shoe Time wants to maintain an ending inventory equal to 25 percent of its next month's sales, the new budgeted monthly ending inventory balance will be:

6,000*0,25= 1,500 pairs of shoes