Question

The Ralston Company manufactures a special line of graphic tubing items. The company estimates it will sell 81,000 units of this item in 2016. The beginning finished goods inventory contains 26,000 units. The target for each year's ending inventory is 16,000 units.

Each unit requires six feet of plastic tubing. The tubing inventory currently includes 79,000 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?

a.398,500.

b.549,500.

c.453,500.

d.494,500.

Answer 1

c. $453,500

Step-by-step explanation:

The computation of materials requirements (in feet) is shown below:-

Estimated sales $81,000

Add Ending inventory $16,000

Less Opening inventory $26,000

Units for production budget $71,000

Production units $426,000

($71,000 × 6)

Add Ending reserve $106,500

($426,000 ÷ 12 × 3)

Less Beginning reserve of

feet $79,000

Materials requirements $453,500

Therefore the materials requirements (in feet) for 2016 is $453,500