Question

The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 670,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 60,000 units. However, the target ending finished goods inventory for each year is 20,000 units.

Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 210,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to four months’ sales requirements. Sales and production take place evenly throughout the year.

Required:

a. Compute the total targeted production of the finished product for the coming year.

b. Compute the required amount of plastic to be purchased for the coming year. (Do not round intermediate calculations.)

Answer 1

Answer:
Particulars	Formula and Calculations
Calculation of total targeted production of the finished product:	= Desired sales + ending inventory - Beginning inventory
	= 670000 + 20000 - 60000
	= 630000 Units
Calculation of required amount of plastic to be purchased for the coming year	= Total ounces required for targeted production + Ending inventory - Beginning inventory
	= (630000 * 6) + (670000 * 6 * 4/12) - 210000
	= 4910000 Ounces