Question

Vineyard Corporation, a manufacturer of fine wines, began the year 2016 with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of 2016 to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What is the desired ending inventory for the second quarter?

Answer 1

Desired Ending Inventory for the second quarter is 25,000 bottles

Step-by-step explanation:

Vineyard Corporation

1st Quarter

Beginning Inventory 20,000

Budgeted Sales 200,000 bottles,

Ending Inventory 15,000 bottles ( 10% of the 2nd quarter's sales)

As the management has already decided that an ending inventory of 10% of the subsequent quarter's sales is appropriate therefore we get Ending inventory by finding 10% of the subsequent quarter sales.

Vineyard Corporation

2nd Quarter

Beginning Inventory 15,000

Budgeted Sales 150,000 bottles,

Ending Inventory 25,000 bottles ( 10% of the 3rd quarter's sales)

(250,000*10/100= $ 25,000)

Vineyard Corporation

3rd Quarter

Beginning Inventory 25,000

Budgeted Sales 250,000 bottles,

Ending Inventory 40,000 bottles ( 10% of the 4th quarter's sales)