Question

At January 1, Butch Corp. has beginning inventory of 3,334 surfboards. Butch estimates it will sell 7,078 units during the first quarter of the year with a 25% increase in sale each quarter. Butch's policy is to maintgin an ending inventory equal to 40% of the next quarter's sales. Each surfboard costs $126 and is sold for $218. How much is budgeted sales revenue for the fourth quarter of the year? Round answer to nearest whole dallor.

Answer 1

To calculate the budgeted sales revenue for the fourth quarter of the year, we need to determine the number of surfboards Butch Corp. plans to sell in the fourth quarter and then multiply that by the selling price per surfboard.

First, let's calculate the sales forecast for each quarter. Butch Corp. estimates it will sell 7,078 units during the first quarter. Since there is a 25% increase in sales each quarter, we can calculate the sales forecast for each subsequent quarter as follows:

- Second quarter: 7,078 units + (25% * 7,078 units) = 8,847 units
- Third quarter: 8,847 units + (25% * 8,847 units) = 11,059 units
- Fourth quarter: 11,059 units + (25% * 11,059 units) = 13,824 units

Now that we know the number of surfboards Butch Corp. plans to sell in the fourth quarter (13,824 units), we can multiply this by the selling price per surfboard ($218) to calculate the budgeted sales revenue for the fourth quarter:

13,824 units * $218 per surfboard = $3,014,832

Therefore, the budgeted sales revenue for the fourth quarter of the year is approximately $3,014,832.