Greener Grass Fertilizer Company plans to sell 260,000 units of finished product

Question

Greener Grass Fertilizer Company plans to sell 260,000 units of finished product in July and anticipates a growth rate in sales of 4 percent per month. The desired monthly ending inventory in units of finished product is 80 percent of the next month's estimated sales. There are 208,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of raw material at a cost of $1.25 per pound. There are 750,000 pounds of raw material in inventory on June 30 Required 1. Compute the company's total required production in units of finished product for the entire three-month period ending September 30. (Round all intermediate calculations and your final answer to the nearest unit.) 2. Independent of your answer to requirement (1), assume the company plans to produce 600,000 units of finished product in the three-month period ending September 30, and to have raw-material inventory on hand at the end of the three-month period equal to 25 percent of the use in that period. Compute the total estimated cost of raw-material purchases for the entire three-month period ending September 30 1. Total required production in units 2. Total estimated cost

Explanation / Answer

production Budget July August September Quarter october Estimated sales 260000 270400 281216 811616 292465 Add:Ending inventory 216320 224973 233972 233972 total needs 476320 495373 515188 1045588 less openning inventory 208000 216320 224973 208000 production required 268320 279053 290215 837588 Materials purchase budget production required 600000 pounds required per unit 4 total pounds required 2400000 Add ending inventory 600000 total needs 3000000 less :opening inventory -750,000 materials required 2250000 cost per pound 1.25 Materials cost 2812500 1) Total required production in units 837588 2) Total estimated cost 2812500

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