This answer results from using 80,000 units of raw material as the beginning inventory balance and 100,000 units of raw material as the ending inventory balance to calculate the purchases. It is true that two units of raw material are needed to produce each unit of finished product. However, the number of units of raw material in beginning and ending inventory have been given in the problem as 40,000 and 50,000, and they should not be multiplied by 2 to calculate the number of units to be purchased during the year.
We know that two units of material are needed to produce each unit of finished good. Since 500,000 finished units are to be manufactured, the number of units of raw materials needed for production is 1,000,000. The inventory level of raw materials also is to increase during the year by 10,000, so 1,010,000 units of raw materials will need to be purchased during the year.
This is the number of units of raw materials needed for production. However, it does not take the materials inventory level increase into consideration. See the correct answer for a complete explanation.
This answer incorporates a decrease in the raw materials inventory during the year instead of an increase. See the correct answer for a complete explanation.
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*Two units of raw material are needed to produce each unit of finished product. If 500,000 finished units were to be manufactured for the year by Simpson Inc., the units of raw material that must be purchased would be