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 600,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 90,000 units. However, the target ending finished goods inventory for each year is 20,000 units. Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 250,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to three 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

Answer 1

a
Expected sales	600000
Add: Desired ending inventory of finished goods	20000
Total needs	620000
Less: Beginning inventory of finished goods	-90000
Total targeted production in units	530000
b
Total targeted production in units	530000
X Ounces of plastic per unit	6
Total materials required for production	3180000
Add: Desired ending inventory of materials	900000	=(600000*3/12)*6
Total needs	4080000
Less: Beginning inventory of materials	-250000
Materials to be purchased in ounces	3830000