Question

Rascal Company plans to produce 100,000 toy fire trucks during July.

Planned production for August is 150,000 trucks. Sales are forecasted

at 90,000 trucks for July and 110,000 trucks for August. Each truck has eight wheels. Rascal's policy is to maintain S percent of the next month's production in inventory at the end of a month. How many wheels should Rascal purchase during July?

(A) 860,000

(B)   820,000

(C) 810,000

(D) 780,000

please show calculations . Tks

Answer 1

Pecentage is not in clarity. Based on assumption I solved answer as follows
if Percent of next months production in inventory at the end of a month is 5%
Answer is (B) 820,000
Material Purchase budget
	Jul	Aug
Planned production of trucks	1,00,000	1,50,000
Number of wheels required per truck	8	8
Total number of wheels required	8,00,000	12,00,000
Add: Ending wheels inventory (1,200,000*5%)	60,000
Total number of required for production	8,60,000
Less: Beginning wheels inventory (800,000*5%)	40,000
Total number of wheels required to purchase	8,20,000
if Percent of next months production in inventory at the end of a month is 15%
Answer is (A) 860,000
Material Purchase budget
	Jul	Aug
Planned production of trucks	1,00,000	1,50,000
Number of wheels required per truck	8	8
Total number of wheels required	8,00,000	12,00,000
Add: Ending wheels inventory (1,200,000*15%)	1,80,000
Total number of required for production	9,80,000
Less: Beginning wheels inventory (800,000*15%)	1,20,000
Total number of wheels required to purchase	8,60,000