Estimating Production Costs
The Fancy Umbrella Company makes beach umbrellas. The production
process requires 3 square meters of plastic sheeting and a metal
pole. The plastic sheeting costs $0.50 per square meter and each
metal pole costs $1.00. At the beginning of the month, the company
has 5,000 square feet of plastic and 1,000 poles in raw materials
inventory. The preferred raw material amount at the end of the
month is 3,000 square feet of plastic sheeting and 600 poles. The
company has 300 finished umbrellas in inventory at the beginning of
the month and plans to have 200 finished umbrellas at the end of
the month. Sales in the coming month are expected to be 5,000
umbrellas.
How many umbrellas must the company produce to meet demand and have sufficient ending inventory?
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Umbrellas to be produced = Sales + Ending inventory - Beginning inventory
= 5,000 + 200 - 300
= 4,900
Estimating Production Costs The Fancy Umbrella Company makes beach umbrellas. The production process requires 3 square...
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