Question

Compute the dollar amount of working capital that can be reduced at year-end if the ending heel raw material inventory is cut by half.

Answer 1

Answer:

Note: The full question is attached as picture below

a.                                               No of units Cost per unit   Total Cost

Beginning Inventory      1,200                     $8            $9,600  

Add Purchase                            35,000                  $8            $280,000  

Inventory available for              36,200                  $8             $289,600  

production

Less Inventory transferred to    33,200                 $8             $265,600  

production  (16,600 Pairs*2 Heels)

Ending Inventory                        3,000                  $8             $24,000

b. Working capital will be reduced by: (3,000*$8)/2 = $12,000