Question

The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 660,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 100,000 units. However, the target ending finished goods inventory for each year is 25,000 units.

Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 220,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to four months’ sales requirements. Sales and production take place evenly throughout the year.

Required:

a. Compute the total targeted production of the finished product for the coming year.

b. Compute the required amount of plastic to be purchased for the coming year. (Do not round intermediate calculations.)

total targeted production	-
required amount of plastic	-

Answer 1

Calculation of total targeted production of finished product
sale unit				660000
add: desired inventory-ending				25000
less: inventory at the beginning				100000
total targeted production				585000
b) required amount of plastic to be purchased
total production (585000*6)				3510000
add: desired ending inventory (660000*6*4/12)				1320000
total direct material need				4830000
less: inventory at the beginning				220000
direct material to be purchased				4610000

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