Question

Exercise 23-7 Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows. Month Units April 2,520 May 2,440 June 2,390 The target ending inventory of finished products is as follows. March 31 2,010 April 30 2,280 May 31 2,170 June 30 2,330 2 units of material are required for each unit of finished product. Production for July is estimated at 2,750 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 50% 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 $

Answer 1

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	April	May	June
Estimated Sales Units	2520	2440	2390
Add: Ending Inventory	2280	2170	2330
Less: Beginning inventory	2010	2280	2170	Given in que
Production Units	2790	2330	2550	2750
Raw Material per unit needed	2	2	2	2
Total Raw Material needed for production units	5580	4660	5100	5500
add: Closing Inventory 50% of following month	2330	2550	2750
less: beginning inventory	2790	2330	2550
April: 50% of 5580
May, June: Closing of last month is opening
Purchases	5120	4880	5300
Cost per unit	7	7	7
May Raw Material Purchases		34160