What would be the budgeted inventory for March 31st?
C. Cannot be determined from the data given
The Cardinal Co. had a finished goods inventory of 55,000 units on January1. Its projected sales for the next four months were: January-200,000 units; February-180,000 units; March-210,000 units; and April-230,000 units. The Cardinal Co. wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.
The Cardinal Co. has a policy of maintaining inventory equal to 20% of the next month's estimated sales. According to the information provided, the estimated sales for January are 200,000 units; for February they are 180,000 units; for March 210,000 units and for April it is 230,000 units.
As per the company's policy the finished goods inventory on March 31st should be 20% of the estimated sales for the next month which is April. In April 230,000 units are estimated to be sold.
This gives the required inventory as 20% of 230,000 = 0.2*230000 = 46000
The right option is A. The budgeted inventory for March 31st is 46000.