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

Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows Units Month April May June 2,530 2,420 2,310 The target ending inventory of finished products is as follows March 31 April 30 May 31 June 30 2,050 2,300 2,100 2,300 2 units of material are required for each unit of finished product. Production for July is estimated at 2,710 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 60% 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. Raw material purchases cost

Explanation / Answer

So, May month raw material purchases = $ 33,516

Calculations Particulars Month March April May June July A Sales 0 2530 2420 2310 B Closing Inventory 2050 2300 2100 2300 C = Previous month B Opening Inventory 0 2050 2300 2100 2300 D = A + B - C Production 2780 2220 2510 2710 E Materials per unit 2 2 2 2 2 F = D x E Material required for production 0 5560 4440 5020 5420 G = F of next month x 60% Closing inventory of raw materials 3336 2664 3012 3252 H = G of previous month Opening inventory of Raw materials 3336 2664 3012 3252 I = F + G - H Purchases of raw materials 4888 4788 5260 J Price per unit 7 7 7 7 7 K = I x J Purchase value 34216 33516 36820

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