Question

JL Corporation makes a product that is very popular in the winter. Thus sales peak in June each year leading to higher production levels in April and May as shown below:

OCTOBER NOVEMBER DECEMBER TOTAL

Direct Materials Budget 40,000 60,000 80,000 180,000

Each unit needs two coils. The coils can be difficult to get at times, so the company has determined that it must have 20% of the required springs at the start of each period. The Company had 16,000 springs in inventory at the beginning of October. JL Corp has determined it needs 8,000 springs at the end of December.

1) How many gages are needed to be purchased to meet the production schedule for the quarter?

2) If the Coils cost $1.50 each and JL Corporation pays for half of the springs in the month they were purchased and half in the following month, how much did they pay for the springs during the current fiscal quarter (October thru December). Accounts Payable at the beginning of October was $80,000 all of which was paid in October. EXTRA CREDIT: What is Accounts Payable at the end of December?

Answer 1