Question

The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 610,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 70,000 units. However, the target ending finished goods inventory for each year is 20,000 units.

Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 200,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to two months’ sales requirements. Sales and production take place evenly throughout the year.

a. Compute the total targeted production of the finished product for the coming year.

b. Compute the required amount of plastic to be purchased for the coming year.

Answer 1

Computation of Target Production
Expected Sells	610,000
Ending Finished Goods	20,000
Less: Begining Finished Goods	(70,000)
Targeted Production	560,000
Computation Of amount of Plastic to be purchased
Targeted Production	560,000
Shells Required per Unit	6 Ounce
Total Ounce required for Targeted Production (560000*6)	3,360,000
Add: Ending Desired Inventory (610000/12Month* 2 Month )* 6 Ounce	610,000
Less: Begining inventory	(200,000)
Total Purchase to be made	3,770,000