Smith company expects to sell 5,000 units. Each unit requires: 2 pounds of direc

Question

Smith company expects to sell 5,000 units.

Each unit requires:

     2 pounds of direct material at $10 per pound
     2 direct labor hours at $12 per direct labor hour

The manufacturing overhead rate is $7 per direct labor hour.

The beginning inventories are as follows:

     Direct materials: 1,000 pounds
     Finished goods: 2,500 units

The planned ending inventories are as follows:

     Direct materials: 2,000 pounds
     Finished goods: 1,500 units

Required:

1. What is the planned production?

2. What are the required direct material purchases for the planned production?

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Planned Production:

Sales = 5000

+ Desired Ending Inventory = 1500

- Opening Inventory = 2500

Required Production = 4000 units

Part 2:

Raw Material needed for Planned Production = 4000*2= 8000

+ Desired Ending Inventory of Raw Materials = 2000

- Opening Inventory of Raw Materials = 1000

Required Material Purchases = 9000

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.