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

Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows Month April May June Units 2,530 2,490 2,360 The target ending inventory of finished products is as follows March 31 April 30 May 31 une 30 2,020 2,300 2,200 2,310 2 units of material are required for each unit of finished product. Production for July is estimated at 2,650 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 $7 per unit throughout the period Calculate the May raw materials purchases in dollars. Raw material purchases cost

Explanation / Answer

Raw material purchase cost $27,216 *Calculaiton : 40 % of Raw material needed for may + 40% of Raw material needed for june (4780 * 40%) + (4940 * 40%) 1912 + 1976 3888 3888 units @ $7 per unit $27,216 *Calculation of production of may Sales for may 2,490 Add: Closing stock 2,200 4,690 Less: opening stock (cl. Of April) -2,300 Production 2,390 Raw material needed for may: 2 * 2,390 4780 *Calculation of production of June: Sales for June 2,360 Add: Closing stock 2,310 4,670 Less: opening stock (cl. Of May) -2,200 Production 2,470 Raw material needed for June: 2 * 2,470 4940

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