Question

Carter production, inc.'s required production for the first six month of the year is as follows. month required production january 50,000 february 70,000 march 85,000 april 105,000 may 110,000 june 120,000 each unit requires two pounds of material. given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in february is _____ .

a. 146,000
b. 154,000
c. 174,000
d. 134,000

Answer 1

Carter Production, Inc. must calculate February's material requirements based on its own production and the desired ending inventory for March. By first determining March's material requirement and factoring in February's production needs, the calculation shows that Carter must purchase 174,000 pounds of material in February.

Step-by-step explanation:

To calculate the pounds of material Carter Production, Inc. needs to purchase in February, we first determine March's production needs since February's desired ending inventory is 20% of March's production. March requires 85,000 units, and since each unit requires two pounds of material, March will require 85,000 units * 2 pounds/unit = 170,000 pounds of material. To calculate February's ending inventory, we take 20% of March's material requirement, which is 0.20 * 170,000 pounds = 34,000 pounds.

Now, we also compute February's total material needs, which includes what will be produced in February plus the ending inventory for March. February's production is 70,000 units, so it needs 70,000 units * 2 pounds/unit = 140,000 pounds of material for production, plus the 34,000 pounds for March's ending inventory, totaling 140,000 pounds + 34,000 pounds = 174,000 pounds. Therefore, Carter Production, Inc. needs to purchase 174,000 pounds of material in February.