Chandler Ltd. estimates sales for the second quarter of 2014 will be as follows.

Question

Chandler Ltd. estimates sales for the second quarter of 2014 will be as follows.

Month

Units

The target ending inventory of finished products is as follows.

2 units of material are required for each unit of finished product. Production for July is estimated at 2,620 units to start building inventory for the fall sales period. Chandler’s policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month’s production requirements.

Raw materials are expected to cost $5 per unit throughout the period.

Calculate the May raw materials purchases in dollars.

Month

Units

Explanation / Answer

production requirement April may june july opening stock of finished goods 2020 2300 2190 2320 units sold 2560 2410 2330 closing stock 2300 2190 2320 units produced 2840 2300 2460 -2320 2 opening stock of raw material (2* opening stock of finished goods) 4040 4600 4380 4640 units of raw material used in unit sold (2* units sold of finished goods) 5120 4820 4660 closing stock of raw material (2* closing stock of finished goods) 4600 4390 4640 units purchased of raw material 5680 4610 4920 -4640 purchase of raw material in value (units purchased *5) 28400 23050 24600

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