Question

Greener Grass Fertilizer Company plans to sell 230,000 units of finished product in July and anticipates a growth rate in sales of 6 percent per month. The desired monthly ending inventory in units of finished product is 85 percent of the next month's estimated sales. There are 195,500 finished units in inventory on June 30. Each unit of finished product requires 5 pounds of raw material at a cost of $2.05 per pound. There are 840,000 pounds of raw material in inventory on June 30. Required: 1. Compute the company's total required production in units of finished product for the entire three-month period ending September 30. (Round all intermediate calculations and your final answer to the nearest unit.) 2. Independent of your answer to requirement (1), assume the company plans to produce 760,000 units of finished product in the three-month period ending September 30, and to have raw-material inventory on hand at the end of the three-month period equal to 25 percent of the use in that period. Compute the total estimated cost of raw material purchases for the entire three-month period ending September 30. 1. Total required production in units 2. Total estimated cost

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Total 732228 Answer Part 1) Statement of production of Units for the three months period ended Particulars July August September Sales 230000 243800 258428 (230000*1.06) (243800*1.06) Desired Ending inventory 207230 219664 232844 (243800*85%) (258428*85%) (258428*1.06*85%) Total Units Required 437230 463464 491272 Less Beginning Inventory 195500 207230 219664 Total Units To Be Produced 241730 256234 271608 232844 965072 195500 769572 Thus the correct answer is $769572 Part 2) Total estimated cost of raw material purchases = raw material purchases * cost per pound = (desired ending inventory + required for production - beginning inventory) * Cost per pound = ((760000*5*25%)+(760000*5) - 840000) *2.05 = $8015500 Thus the correct answer is $ 8015500 Thus the final answer 25 26 1 Total required production in units 2Total estimated cost Sheets Sheets Sheet7 Sheets 769572 8015500 Sheeto Sheet 10 Sheet11 Sheet12 Sheet13 Sheet14