This answer results from failing to multiply the number of units to be produced (2,075) by 4 pounds of materials required per unit to find the number of pounds of materials that will be required for production during the current month.
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This answer results from reversing the beginning and ending direct materials inventory units in calculating the amount of direct materials to be purchased. The inventory formula is: Beginning Inventory + Units Produced/Purchased ? Units Sold/Used = Ending Inventory
The question tells us that beginning finished goods inventory on hand is 250 units and the target ending units of finished goods inventory is 325 units. The company plans to sell 2,000 units. The inventory formula is: Beginning Inventory + Units Produced/Purchased ? Units Sold/Used = Ending Inventory Letting P stand for Units Produced, we have the following formula: Beginning Inventory of 250 finished units + P ? 2,000 Units Sold = Ending Inventory of 325 units. Solving for P, we get P = 2,075 units. Since each unit produced requires 4 pounds of material, the total material required for production of 2,075 units = 2,075 × 4 = 8,300 pounds. We now use the materials needed for current production along with the beginning and ending inventories of direct materials to calculate the amount of direct materials that will need to be purchased. We use the same inventory formula: Beginning Inventory + Units Produced/Purchased ? Units Sold/Used = Ending Inventory. Letting P stand for Purchases of Direct Material, we have the following formula: Beginning Inventory of 400 pounds of direct materials + P ? 8,300 pounds Used in Production = Ending Inventory of 800 pounds. Solving for P, we get P = 8,700 pounds of direct material to be purchased.
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How many pounds of materials must be purchased?
