Question

Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in...

Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in February 37,000; and in March 34,000. Each unit is priced at $60. Connor wants to have 35% of the following month's sales in ending inventory. That requirement was met on January 1.

Each speaker system requires 3 boxes and 15 yards of wire. Boxes cost $4 each and wire is $0.60 per yard. Connor wants to have 20% of the following month's production needs in ending raw materials inventory. On January 1, Connor had 24,000 boxes and 100,000 yards of wire in inventory. How many boxes does Connor expect to purchase in January?

a.

159,650
b.

114,420
c.

214,550
d.

148,500
e.

138,420
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Answer #1

b. Correct Answer : 114420

Working

Production Budget
Month Jan Feb March
Sales 40000 37000 34000
Estimated closing inventory 12950 11900
Opening Inventory 14000 12950
Production Required 38950 35950
Purchase Budget- Boxes
Jan Feb
Production Unit 38950 35950
Box/Unit 3 3
No. of Box required 116850 107850
Estimated closing inventory 21570
Opening Inventory 24000
Purchse required ( boxes) 114420
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