Question

Paradise Co., budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year January 1 through December 31:

January 1st December 31st
Raw material units* 40,000 50,000
Finished goods units 80,000 50,000

If Paradise is planning to manufacture 500,000 units of finished product during the year, how many units of raw material will need to be purchased?

Answer 1

1,615,000 units.

Step-by-step explanation:

I think your question is missed of key information, allow me to add in and hope it will fit the original one.

Three pounds of raw material are needed to produce each unit of finished product.

Here is my answer:

Given:

500,000 units are being planed to manufacture

Ending Inventory of Finished Goods = 85,000 units

Beginning Inventory of Finished Goods = 50,000 units

Hence, number of units it would have to manufacture during the year:

= Budgeted Sale Units + Ending Inventory of Finished Goods - Beginning Inventory of Finished Goods

= 500,000 + 85,000 - 50,000

= 535,000 units.

But we know that: Three pounds of raw material are needed to produce each unit of finished product.

So units of raw material are being planed to buy:

535,000* 3 = 1,605,000 units.

Hence, units of raw material will need to be purchased:

= Budgeted purchase units + Ending Inventory of raw materials - Beginning Inventory of raw materials

= 1,605,000 + 50,000 - 40,000

= 1,615,000 units.

Hope it will find you well.