The sales budget for the Johnson Company indicates the following units to be sold: $$\begin{array} { l l } \text { January } & 10,000 \ \text { February } & 8,000 \ \text { March } & 12,000 \ \text { April } & 16,000 \end{array}$$ The company requires that ending inventory be equivalent to 20% of the following month's sales.If each unit is budgeted to have a cost of $4.50, the budgeted balance in the company's ending inventory account at March 31^st will be: A)$4,000 B)$14,400 C)$12,000 D)$18,000

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Quizplus · Accepted Answer

The ending inventory for March needs to be 20% of April's sales. April's sales are projected to be 16,000 units, so the ending inventory for March should be 20% of 16,000 = 3,200 units. At a cost of $4.50 per unit, the value of the ending inventory at March 31st would be 3,200 units * $4.50 = $14,400.