Question

Bodin Company budgets on an annual basis. The following beginning and ending inventory levels (in units) are plannned for the year 20x1. Two units of raw material are required to produce each unit of finished product.

	January 1			December 31
Raw material		44,000			46,000
Work in process		17,000			17,000
Finished goods		96,000			78,000

Required:

1. If Bodin Company plans to sell 456,000 units during the year, compute the number of units the firm would have to manufacture during the year.

2. If 511,000 finished units were to be manufactured by Bodin Company during the year, determine the amount of raw material to be purchased.

Answer 1

1.) Units to be manufacture to sell 456,000 units :-

Sales + closing inventory - opening inventory

= 456,000 + 78,000 - 96,000 = 438,000 units

2.) ​​​​​​ Raw material to be purchased :-

Raw material required for production

= 511,000 x 2 = 1,022,000

Add: Ending inventory 46,000

Less: Opening inventory (44,000)

Raw material to be purchased 1,024,000

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