Question

Preston, Inc., manufactures wooden shelving units for collecting and sorting mail. The company expects to produce 570 units in July and 600 units in August. Each unit requires 3 feet of wood at a cost of $1.9 per foot. Preston wants to always have 20% of the next month’s required feet of wood on hand in materials inventory. What is Preston’s raw materials purchases budget for July?

Answer 1

Raw Material	June	July	August
Number of units to be produced		570 units	600 units
Total Raw Material Usage( 3 feet of wood per unit)		1,710 feet of wood	1,800 feet of wood
Add: Desired closing stock of raw material each month	342 feet	360 feet
Material Required		2070 feet
Less : Opening Stock Available		(342 feet)	(360 feet)
Material to Purchase:		1728 feet
Purchase Price per Feet		$1.9 per feet
Total Cost for Material to be Purchased:		$3,283.2