Question

Rensing Ltd. estimates sales for the second quarter of 2020 will be as follows. Month Units April May June 2,540 2.460 2,320 The target ending inventory of finished products is as follows. March 31 April 30 May 31 June 30 2,040 2.210 2,140 2,380 2 units of material are required for each unit of finished product. Production for July is estimated at 2,670 units to start building inventory for the fall sales period. Rensing's policy is to have an inventory of raw materials at the end of each month equal to 60% of the following month's production requirements. Raw materials are expected to cost $6 per unit throughout the period. Calculate the May raw materials purchases in dollars. Raw material purchases cost $

Answer 1

Answer:

May	June
Sales units	2460	2320
Add: Target ending inventory	2140	2360
Less: Beginning inventory	-2210	-2140
Required production	2390	2540
	May
Required production	2390
X Units of materials per unit	2
Materials required for production	4780
Add: Ending inventory	3048	=2540*2*60%
Less: Beginning inventory	-2868	=4780*60%
Required material purchases in units	4960
X Cost per unit	6
Raw material purchases cost	29760