Question

Independent of your answer to requirement (1), assume the company plans to produce 620,000 units of finished product in the three-month period ending September 30, and to have raw-material inventory on hand at the end of the three-month period equal to 25 percent of the use in that period. Compute the total estimated cost of raw-material purchases for the entire three-month period ending September 30

Answer 1

Purchases= 1,595,000 pounds

Step-by-step explanation:

Giving the following information:

Production= 620,000 units

Beginning raw materials inventory= 730,000 pounds

Desired ending inventory= 25% of the three months requirement.

Each unit requires 3 pounds of raw material.

To calculate the purchases required, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Purchases= (620,000*3) + (620,000*3)*0.25 - 730,000

Purchases= 1,595,000 pounds