The following forecasted sales pertain to Isaac Company: Month Sales September $

Question

The following forecasted sales pertain to Isaac Company:
Month Sales
September $180,000
October 200,000
November 160,000
December 140,000

Collection pattern:
55 percent in month of sale
45 percent in month following sale
Accounts Receivable (August 31) $48,000
Finished Goods Inventory (August 31) 19,000

Isaac Company has a selling price of $10 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales. Calculate the budgeted beginning balance in units for finished goods inventory on November 1?

Explanation / Answer

This problem is not tricky or anything, just have to pay attention.
Month sales are given in dollars so you will have to convert them to units and then go from there.

So sale in units for November = $160,000 / $10 = 16,000 units

and beginning inventory is 25% of next month so on november 1 inventory will be 16,000 * 0.25 = 4,000 units.

November Beginning Inventory = 4,000 units

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