A) For ABC venture, the sales forecast for June is $10M. The July sales are fore

Question

A) For ABC venture, the sales forecast for June is $10M. The July sales are forecasted to increase by 10% over June sales. The Cost of goods sold for all months is 60%. The firm has a policy to have in hand inventory to cover 70% of its sales for the month, and the firm plans an additional safety cushion of $1M worth of inventory.  

Find the beginning of July inventory.

$5.62M; $6.86M; $7.34M; $4.90M; or $3.26M

B) For a venture, its sales forecast for August is $12M. The Cost of goods sold for all months is 60%. The firm has a policy to have in hand inventory to cover 70% of its sales for the month, and the firm plans an additional safety cushion of $1M worth of inventory.

Find the end of July inventory.

$2.98M; $5.45M; $6.04M; $7.35M; or $8.16M

--Thank you. Not sure if there is a typo on Question B.

Explanation / Answer

A) Inventory = 10*1.10*.60*.70 +1 = 5.62 M

Correct option:

$5.62M

B) Inventory = 12*.60*.70 +1 = 6.04 M

Correct option:

$6.04M

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