Question

Finn Company projects cost of goods sold to be $150,000 in October and $200,000 in November. Finn maintains an ending inventory equal to 15% of the next month's projected cost of goods sold. Calculate Finn's desired ending inventory for October.

Answer 1

Finn's desired ending inventory is  $30,000.

Ending inventory is the inventory that a company has at the end of an accounting period that has not been sold.

Ending inventory = beginning inventory + goods bought during the period - cost of goods sold.

Finn's desired ending inventory = percentage x projected cost of goods sold in November

15% x $200,000

= 0.15 x $200,000 = $30,000

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