Question

Trumbull Co. plans to produce 105,000 toy cars during September. Planned production for October is 150,000 cars. Sales are forecasted at 90,000 toy cars for Sept., 120,000 toy cars for October. Each toy car requires 4 wheels. Trumbull's policy is to maintain 10% of the next month's production in inventory at the end of a month. How many wheels should Trumbull purchase during September? a. 438,000 b. 412,500 c. 102,500 d. 410,000

Answer 1

Answer: Option (a) is correct

Explanation:

Closing stock (Sept) = Total units produce in Oct * 4 wheels *10%

= 150,000 units * 4 wheels *10%

= 60,000 wheels

Opening stock (Sept) = Total units produce in Sept * 4 wheels * 10%

= 105,000 units * 4 wheels * 10%

= 42,000 wheels

Total Units consumed (Sept) = Total units produce in Sept * 4 wheels

= 105,000 units * 4 wheels

= 420,000 wheels

Therefore,

Units purchase (Sept) = Total units consumed + Closing stock - Opening stock

= 420,000 + 60,000 - 42,000

= 438,000 wheels