The Casings Plant or Wyoming Machines makes plastics shells for the company\'s c

Question

The Casings Plant or Wyoming Machines makes plastics shells for the company's calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 630,000 calculators. The beginning finished goods inventory of shells at the Casings Plant is 80,000 units. However, the target ending finished goods inventory for each year is 20,000 units. Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 210,000 ounces of plastic are in inventory. Management has set a target to have plastic on hand equal to four months' sales requirements. Sales and production take place evenly throughout the year Requirec a. Compute the total targeted production of the finished product for the coming year. Total targeted production in units b. Compute the required amount of plastic to be purchased for the coming year. (Do not round intermediate calculations.) to be purchased in ounces

Explanation / Answer

Sales are even throughout the year. So, monthly sales

= Yearly sales / 12

= 630,000 / 12

= 52,500 per month

So, Sales for 4 months

= Monthly sales x 4

= 52,500 x 4

= 210,000 units

The following table shows the calculations

Ending Inventory of plastic required

= Sales of 4 months x Quantity required per unit

= 210,000 x 6

= 1,260,000

So, target production = point F = 570,000 units

Purchases required = point K = 4,470,000 ounces

Calculations Particulars Year 1 A Sales units 630000 B Shell required per unit 1 C = A x B Total number of shells required 630000 D Ending Inventory 20000 E Beginning Inventory 80000 F = C + D - E Total production required 570000 G Plastic required per shell 6 H = F x G Total plastic required 3420000 I Ending Inventory of plastic required 1260000 J Beginning Inventory 210000 K = H + I - J Purchases 4470000

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