Question

A company estimates that it will sell 100,000 units of finished goods in March. Each finished good requires 5 feet of raw materials. The projected March 1 inventory balances are 10,000 units of finished goods and 40,000 feet of raw materials. Desired March 31 inventory levels are 9,000 units of finished goods and 42,000 feet of raw materials. What amount of raw materials should the company plan to purchase during March

Answer 1

Answer:

497,000 units

Explanation:

Total production:

= Budgeted production + Desired ending inventory

= (100,000 × 5) + [(9,000 × 5) + 42,000]

= 500,000 + (45,000 + 42,000)

= 500,000 + 87,000

= 587,000

Units to be purchased:

= Total production - Beginning inventory

= 587,000 - [(10,000 × 5) + 40,000]

= 587,000 - (50,000 + 40,000)

= 587,000 - 90,000

= 497,000

Therefore, the raw materials should the company plan to purchase during March is 497,000 units.