Question

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

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