Question

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year 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

Answer:

The desired ending inventory for the second quarter is 25,000 bottles.

Explanation:

Since the management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate, the desired ending inventory for the second quarter can be calculated using the following formula:

Desired ending inventory for the second quarter = Third quarter’s estimated budgeted sales * 10% ............... (1)

Where:

Third quarter’s estimated budgeted sales = 250,000 bottles

Substituting the value into equation (1), we have:

Desired ending inventory for the second quarter = 250,000 * 10% = 25,000 bottles

Therefore, the desired ending inventory for the second quarter is 25,000 bottles.