Question

Osage, Inc., has actual sales for May and June and forecast sales for July, August, September,...

Osage, Inc., has actual sales for May and June and forecast sales for July, August, September, and October as follows:

Actual:
May 5,930 units
June 6,240 units
Forecast:
July 5,910 units
August 6,890 units
September 5,630 units
October 5,210 units

Required:

a. The firm’s policy is to have finished goods inventory on hand at the end of the month that is equal to 70% of the next month’s sales. It is currently estimated that there will be 4,137 units on hand at the end of June. Calculate the number of units to be produced in each of the months of July, August, and September.

Production:    July_____ August___________ September_________


b. Each unit of finished product requires 6 pounds of raw materials. The firm’s policy is to have raw material inventory on hand at the end of each month that is equal to 60% of the next month’s estimated usage. It is currently estimated that 26,800 pounds of raw materials will be on hand at the end of June. Calculate the number of pounds of raw materials to be purchased in each of the months of July and August.

Purchases: July__________    August____________

Business   Accounting   
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Homework Answers

Answer #1

a) Calculate production units

July August September
Sales unit 5910 6890 5630
Add: Desired ending inventory 4823 3941 3647
Total 10733 10831 9277
Less: Beginning inventory -4137 -4823 -3941
Unit to be produce 6596 6008 5336

b) Raw material purchase

July August
Unit to be produce 6596 6008
Raw material per unit 6 6
Raw material needed for production 39576 36048
Add: Desired ending inventory 21628.80 19209.60
Total needs 61204.80 55257.60
Less: Beginning inventory -26800 -21628.80
Raw material needed for purchase 34404.80 33628.80
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