Question

Pitt corp makes and sells a single product, widgets. two pounds of sand are needed to make one widget. budgeted production of widgets for the next few months follows:
september 25,000 units

october 31,000 units

the company wants to maintain monthly ending inventories of sand equal to 20% of the following months production needs. on august 31, 10,000 pounds of sand were on hand.

instructions

how much sand should be purchased in september?

Answer 1

Answer:

52,400 pounds

Explanation:

October:

Sand needed for units to produce:

= Budgeted production of Widgets × Sand needed per unit (Pounds)

= 31,000 units × 2

= 62,000

September:

Sand needed for units to produce:

= Budgeted production of Widgets × Sand needed per unit (Pounds)

= 25,000 units × 2

= 50,000

Desired ending Inventory of sand:

= 20% of next month production needs

= 20% × 62,000

= 12,400

Total sand needs = Sand needed for units to produce + Desired ending Inventory of sand

                             = 50,000 + 12,400

                             = 62,400

Sand To be purchased = Total sand needs - Beginning inventory of sand  

                                       = 62,400 - 10,000

                                       = 52,400 pounds

Therefore, 52,400 pounds of sand should be purchased in September.