The Sun Company manufactures a special line of graphic tubing items. The company

Question

The Sun Company manufactures a special line of graphic tubing items. The company estimates it will sell 75,000 units of this item in 2008. The beginning finished goods inventory contains 20,000 units. The target for each year's ending inventory is 10,000 units.

Each unit requires five feet of plastic tubing. The tubing inventory currently includes 70,000 feet of the required tubing. Materials on hand are targeted to equal three month's production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year.

What are the materials requirements (in feet) for 2008?

Explanation / Answer

Prodn Budget = Sales+Ending Inv-Op Inv

= 75000+10000-20000 = 65000 units

Endng Inv is Three MonthProdn = 65000*(3/12) = 16250 unit

Ending Inv = 16250unit*5 Feet/unit =81,250 feet

Mat Reqd for 65000unit = 65000*5 = 325,000 feet

SO Mat Reqd in 2008 = Mat Reqd + Ending Inv -Op Inv

= 325000 + 81250 - 70000

= 336,250 feet

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