Question

Testbank Question 44: Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter:

Testbank Question 44 Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter: Production Sales 1st 150 120 2nd 160 140 3rd 140 150 4th 100 120 The firm has beginning inventories as follows: Finished goods Direct material A Direct material B 50 units 100 100 A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. How much material A must be purchased in quarter 2? O 138 O 142 O o oo 156 162

Answer 1

Solution:

	I	II	III	IV
Production (Units)	150	160	140	100
Sales (Units)	120	140	150	120

Requirement of Material A for the Production of Quarter I = 150 Units

Opening Stock of Quarter I = 20% of the Material required for Production of the Quarter I

= 20% of 150 Units = 30 Units

Closing Stock of Quarter I = 20% of the Material required for Production of Quarter II

= 20% of 160 Units = 32 Units

Requirement of Material A for the Production of Quarter II = 160 Units

Opening Stock of Quarter II = Closing Stock of Quarter I = 32 Units

Closing Stock of Quarter II = 20% of the Material required for Production of Quarter III

= 20% of 140 Units = 28 Units

Calculation of the units to be purchased:

	Quarter I	Quarter II
Units used for Production (Units)	150	160
Add: Closing Stock (Units)	32	28
	182	188
Less: Opening Stock (Units)	30	32
Number of Units to be purchased	152	156

Therefore, the number of units required to be purchased for the Quarter II is 156 Units.

Correct option is 156.