Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.
ID: 2453200 • Letter: R
Question
Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.
Month
Units
The target ending inventory of finished products is as follows.
2 units of material are required for each unit of finished product. Production for July is estimated at 2,750 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 50% of the following month’s production requirements.
Raw materials are expected to cost $7 per unit throughout the period.
Calculate the May raw materials purchases in dollars.
Month
Units
April 2,560 May 2,430 June 2,360Explanation / Answer
Month Sales Ending Inventory Production RM required Ending RM RM purchased Cost April 2560 2290 2840 5680 2260 7940 $55,580.00 May 2430 2120 2260 4520 2640 4900 $34,300.00 June 2360 2400 2640 5280 2750 5390 $37,730.00