Osage, Inc, has actual sales tor May and June and forecast sales for Juty, Augus

Question

Osage, Inc, has actual sales tor May and June and forecast sales for Juty, August, September, and Ocdober as follows Actual May June 5,840 units 6,200 units 5,960 units 6,890 unit 5,660 units 5.390 unis July August October Required: a The firm's policy is to have t tshed goods inventory on hand at the end of re month nat s equal to 70% ofine next morms saesniscurently estnted tatthew" be72unes on hnd at the end of June Calculate the number of units to be produced in each of the months of July. August, and September b. Each unit o finished product re ires 7 pounds of raw materials The firm's policy is to have raw material r ve tory on hand at the end of each month that is equal lo 50% of he next morn's estmased usage tt s curenty estamated that 25,800 pounds of raw materials willbe on hand at the end of June Caiculate the number of pounds of raw maberials to be purchased in each of the months of July and August 237 PM Type here to search

Explanation / Answer

OSAGE INC. Sales(Units) May 5840 June 6200 July 5960 Aug 6890 Sept 5660 Oct 5390 Production Budget July Aug Sept Sales(Units)=A 5960 6890 5660 Ending Inventory=(B)=(6890*70%) in July,(5660*70%) in Aug,(5390*70%) in Sep 4823 3962 3773 Total Needs=(A)+(B) 10783 10852 9433 Less: Beginning Inventory 4172 4823 3962 Production 6611 6029 5471 July Aug Sept Production 6611 6029 5471 Ending inventory of june =Beginning Inventory of July Ending inventory of july =Beginning Inventory of Aug Ending Inventory of Aug=Beginning inventory of Sep Raw Material Purchase Budget July Aug Sept Production=(A) 6611 6029 5471 Pounds of raw material required per unit=(B) 7 7 7 Units of raw material needed for production=(A)*(B) 46277 42203 38297 Add: Ending Raw material inventory=(42203*50%) in July,(38297*50%) in Aug 21101.5 19148.5 Total Units of Raw material needed=(Units of Raw material needed+Ending Inventory) 67378.5 61351.5 Less: Beginning Inventory 25800 21101.5 Purchases=(Total Units of raw material needed -Ending Inventory 41578.5 40250 July Aug Purchases 41578.5 40250

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