On January 1, 2023, Buck Corp. has beginning inventory of 2,000 deer stands. Buck estimates it will sell 10,000 units during the first quarter of 2020 with a 12% increase in sales each quarter. Buck’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each deer stand costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2020?
First, we need to calculate the estimated sales for the third quarter of 2020. We know that sales are expected to increase by 12% each quarter, so we can calculate:
Q1 sales: 10,000 units
Q2 sales: 10,000 * 1.12 = 11,200 units
Q3 sales: 11,200 * 1.12 = 12,544 units
Now that we know the estimated sales for the third quarter, we can calculate the budgeted sales revenue:
Q3 sales revenue: 12,544 units * $150 = $1,881,600
Therefore, the budgeted sales revenue for the third quarter of 2020 is $1,881,600.
Here are the steps to solve the problem:
1. Calculate the estimated sales for each quarter:
- Q1 2023: 10,000 units
- Q2 2023: 10,000 x 1.12 = 11,200 units
- Q3 2023: 11,200 x 1.12 = 12,544 units
- Q4 2023: 12,544 x 1.12 = 14,036.48 units (round up to 14,037 units)
2. Calculate the estimated ending inventory for each quarter:
- Q1 2023: 25% x 11,200 = 2,800 units
- Q2 2023: 25% x 12,544 = 3,136 units
- Q3 2023: 25% x 14,037 = 3,510 units
- Q4 2023: no need to calculate as it is the last quarter
3. Calculate the estimated cost of goods sold (COGS) for each quarter:
- Q1 2023: (10,000 - 2,800) x $100 = $720,000
- Q2 2023: (11,200 - 3,136) x $100 = $908,400
- Q3 2023: (12,544 - 3,510) x $100 = $1,004,000
- Q4 2023: (14,037 - no ending inventory because it is the last quarter) x $100 = $1,403,700
4. Calculate the estimated sales revenue for each quarter:
- Q1 2023: 10,000 x $150 = $1,500,000
- Q2 2023: 11,200 x $150 = $1,680,000
- Q3 2023: 12,544 x $150 = $1,881,600
- Q4 2023: 14,037 x $150 = $2,105,550
5. Calculate the estimated budgeted sales revenue for the third quarter of 2023:
- Q3 2023: $1,881,600