Question

Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget:

The cost of platinum to be purchased to support August production is:
A. $195,840.
B. $198,000.
C. $200,160.
D. $391,680.
E. Some other amount.

Answer 1

To calculate the cost of platinum for August production, one must know the total ounces required for production, add the 10% for the next month's inventory, and multiply the total ounces by the cost per ounce. Without the precise production figures, we cannot provide an exact cost but can describe the method for the calculation.

Step-by-step explanation:

The question pertains to the calculation of the cost of platinum that Northwest will need to purchase to support their production in August. Assuming that there is adequate information about the anticipated production levels, the calculation will involve determining the quantity of platinum in ounces needed for production plus the 10% kept as ending inventory for the next month. The cost per ounce of platinum is given as $360. To calculate the cost, follow these steps:

• Determine the total ounces of platinum required for August's production.
• Calculate the required ending inventory of platinum for September (10% of September’s production usage).
• Add the required platinum for August production to the ending inventory for September.
• Multiply the total ounces of platinum by the cost per ounce to find the total cost of platinum to be purchased for August.

Without the specific data on the production levels for August and September, an exact figure can't be provided. However, the process described above would yield the correct answer once the necessary production data is available.