Tidewater plans to sell 85,000 units of product no. 794 in May, and each of thes
ID: 2507885 • Letter: T
Question
Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Pertinent data follow.
Product Nol. 794 Raw Material
Actual May 1 inventory 11,000 units 29,000 units
Desired May 31 inventory 17,000 units 20,000 units
On the basis of the information presented, how many units of raw material should Tidewater purchase for use in May production?
228,000
246,000
264,000
282,000
some other amount
228,000
246,000
264,000
282,000
some other amount
Explanation / Answer
The answer is 264,000.
This question is based on understanding the formula: beginning balance + purchase - used = ending balance.
First, we need to find unites of Product that need to be purchased. We know beginning (11K), ending (17K), and sold (85K). So we need to produce 85K + 17K - 11K = 91,000 units of product.
We need to then translate this inot units of raw material. We know each product takes 3 units of raw material so to produce 91K, we need 91 * 3 = 273K of raw material. Further, we know that we can have raw material inventory that is 9K less than starting (20K - 29K). So we can just purchase 273 - 9 = 264K of raw material.
Trust me, the other two answers posted are both wrong.