Truliant co. sells a product called Withall and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?
A) 1,940
B) 1,800
C) 1,900
D) 1,850

Question

Truliant co. sells a product called Withall and has predicted the following sales for the first four months of the current year:  Ending inventory for each month should be 20% of next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?
A) 1,940 
B) 1,800 
C) 1,900 
D) 1,850

Quizplus · Accepted Answer

To determine how many units should be purchased in February, we need to first calculate the expected sales for the months of February, March, and April.

March's predicted sales = 11,000 * 1.05 = 11,550
April's predicted sales = 11,550 * 1.05 = 12,128

Next, we need to calculate the ending inventory for each month using the 20% rule:

February's ending inventory = 11,550 * 0.2 = 2,310
March's ending inventory = 12,128 * 0.2 = 2,426.4

Finally, we can calculate February's required purchases:

February's required purchases = March's predicted sales - February's ending inventory = 11,550 - 2,310 = 9,240

Therefore, the answer is A) 1,940.

Truliant Co