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Hello dear tutor! I am so confused for this question. I cannot understand how it is solved. I will appreciate your help in this regard.
A retailer forecasts that sales in the first month of the year will be $600,000 and will then grow at 4% per month for the next three months. It prices its products by adding a mark-up of 20% to its purchase cost. The retailer always carries sufficient inventory to cover the next month’s forecast sales.9. What is the forecast inventory (to the nearest dollar) at the end of the second month of the year?
$540,800
$562,432
$648,960
$811,200The inventory at the end of the second month will be the amount needed to cover sales for the third month.
The sales in the third month will be 600,000 x 1.04^2 = 648,960
However these are at selling price, but the inventory will be value at cost.
So the cost of the inventory at the end of the second month will be 648,960 / 1.20 = 540,800.
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