Question

Blank Corporation manufactures and sells electric cars. Expected sales and production (in units) for the upcoming months of 2020 are as follows: October November December Expected unit sales 8,000 9,000 10,000 Units to be produced 9,000 10,000 11,000 10 pounds of silver are needed to produce each car. Blank's policy has always been to have enough raw material on hand at the end of the month to cover 10% of the next month's production requirements. How many pounds of silver should Blank plan on purchasing during the month of October? Group of answer choices

100,000 pounds

None of other answers

90,000 pounds

91,000 pounds

Answer 1

Purchase budget:

*Ending inventory = 10% of next month's production

For october beginning inventory would be equal to 10% of october's production requirement.

	October	November	December
units to be produced	9000	10,000	11,000
Silven per unit (In pounds)	10	10	10
Silven required for production	90,000 [9000*10]	100,000 [10,000*10pounds]
Add: Silven desired ending inventory	10,000[100,000*10%]
Less: Silven beginning inventory	9,000[90,000*10pounds]
Unit sto be purchased(In pounds)	91,000[900,000+10,000-9,000]

Thus asnwer is 91,000 pounds

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