Question

The Ralston Company manufactures a special line of graphic tubing items. The company estimates it will sell 79,000 units of this item in 2016. The beginning finished goods inventory contains 24,000 units. The target for each year's ending inventory is 14,000 units. Each unit requires four feet of plastic tubing. The tubing inventory currently includes 76,000 feet of the required tubing. Materials on hand are targeted to equal 3 months' production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What are the materials requirements (in feet) for 2016

Answer 1

Total inventory to be purchased = 200,000 + 79,000 = 279,000

Step-by-step explanation:

Provided information,

Number of units to be sold in the year = 79,000

Opening finished goods inventory = 24,000 units

Target year end inventory = 14,000 units

Units to be produced during the year = 79,000 - 24,000 + 14,000 = 69,000 units

Raw material for each unit = 4 feet

Total requirement = 69,000
`*` 4 = 276,000 feet

Out of this inventory in hand = 76,000 feet

Thus, Inventory to be purchased = 200,000 feet

for the year ending inventory = (79,000/12)
`*` 3 = 19,750

Inventory for 19,750 units = 19,750
`*` 4 = 79,000

Therefore, total inventory to be purchased = 200,000 + 79,000 = 279,000