In: Accounting
Production estimates for August for Jay Company are as follows:
Estimated inventory (units), August 1 | 12,000 |
Desired inventory (units), August 31 | 9,000 |
Expected sales volume (units), August | 75,000 |
For each unit produced, the direct materials requirements are as follows:
Material A ($5 per lb.) | 3.0 lbs. |
Material B ($18 per lb.) | 0.5 lb. |
The number of pounds of Materials A and B required for August production is
a.216,000 lbs. of A; 36,000 lbs. of B
b.216,000 lbs. of A; 72,000 lbs. of B
c.234,000 lbs. of A; 39,000 lbs. of B
d.225,000 lbs. of A; 37,500 lbs. of B
Correct option is: a. 216,000 lbs of A ; 36,000 lbs of B | |||
Workings: | |||
August | |||
Budgeted Sales in units | = | 75000 | |
Add: | Desired ending Inventory | = | 9,000 |
Total Production required | = | 84,000 | |
Less: | Beginning Inventory | = | 12,000 |
Units to be produced | = | 72,000 | |
Material A (72000 X 3 lbs) | = | 2,16,000 | |
Material B (72000 X 0.5 lbs) | = | 36,000 |