Actual June 4,150 units July 4,350 units Forecast August 4,200 units September 4

Question

Actual
June 4,150 units
July 4,350 units

Forecast
August 4,200 units
September 4,900 units
October 3,900 units
November 3,700 units

Each unit of finished product requires 5 pounds of raw materials. The firms' policy is to have raw material inventory on hand at the end of each month that is equal to 80% of the next month's estimated usage. It is currently estimated the 13,000 pounds of raw materials will be on hand at the end of July. Calculate the number of punds of raw materails to be purchased in each of the months of August and September.

Explanation / Answer

August : Closing inventory( 4900*5 * 0.8 ) 19,600.00 Add: Raw material issued ( 4200 *5 ) 21,000.00 Less : Opening inventory (13,000.00) Purchases 27,600.00 September : Closing inventory( 3900*5 * 0.8 ) 15,600.00 Add: Raw material issued ( 4900 *5 ) 24,500.00 Less : Opening inventory (19,600.00) Purchases 20,500.00 October : Closing inventory( 3700*5 * 0.8 ) 14,800.00 Add: Raw material issued ( 3900 *5 ) 19,500.00 Less : Opening inventory (15,600.00) Purchases 18,700.00

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