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 79,000 units of this item in 2012. The beginning finished goods inventory contains 24,000 units. The target for each year's ending inventory is 14,000 units. Each unit requires 9 feet of plastic tubing The tubing inventory currently includes 74,000 feet of the required tubing. Materials on hand are targeted to equal 3 months' 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 2012? 362,250. 776,250 547,000 702,250.

Explanation / Answer

Number of units to be produced in 2012

= Estimated sales + Desired ending inventory - Beginning inventory

= 79,000 + 14,000 - 24,000

= 69,000 units

Materials required to produce 69,000 units = 69,000 x 9 = 621,000 feet

Desired ending inventory for 2012 = (621,000 / 12) x 3 = 155,250 feet

Therefore,

Material requirement for 2012

= Materials required for production + Desired ending inventory - Beginning inventory

= 621,000 + 155,250 - 74,000

= 702,250

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