Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.

Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows. 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 S7 per unit throughout the period. Calculate the May raw materials purchases in dollars.

Explanation / Answer

Raw material purchases cost=(sales+ending inventory-begining inventory)*2*$7=(2,440+2,170-2,280)*2*7=$32,620.

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