Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.
ID: 2468451 • Letter: R
Question
Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.
Month Units April 2,590
May 2,440
June 2,400
The target ending inventory of finished products is as follows.
March 31 2,000
April 30 2,290
May 31 2,150
June 30 2,310
2 units of material are required for each unit of finished product. Production for July is estimated at 2,660 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 40% of the following month’s production requirements. Raw materials are expected to cost $4 per unit throughout the period. Calculate the May raw materials purchases in dollars.
Raw material purchases cost $
Explanation / Answer
Statement showing computations Particulars March April May June July Sales 2,590.00 2,440.00 2,400.00 Ending inventory 2,000.00 2,290.00 2,150.00 2,310.00 Beginning Inv = Ending inventory 2,000.00 2,290.00 2,150.00 Production = Sales+ End - Beg 2,880.00 2,300.00 2,560.00 2,660.00 Materials Required for Production @2 5,760.00 4,600.00 5,120.00 5,320.00 Ending Raw Materials @40% 2,304.00 1,840.00 2,048.00 2,128.00 Beginning Raw Materials = Ending Raw Materials 2,304.00 1,840.00 2,048.00 Raw Material Purchases = Prod +End -Beg 5,296.00 4,808.00 5,200.00 Cost of Raw Mat Purchases @4 21,184.00 19,232.00 20,800.00