A manufacturing corporation's most recent production budget indicates the following required production:
October November December
Required production (units) 2,10,000 1,75,000 1,10,000
Each unit of finished product requires 5 Kg of raw materials.
The company maintains raw materials inventory equal to 25% of the next month's expected production needs. How many Kgs of raw material should the corporation plan on purchasing for the month of November?
Answers
Answer:
The corporation should purchase 793750 Kg of raw material for the month of November.
Step-by-step explanation:
The corporation already has 25% of the production unit's stock for the month of November
Thus the corporation already has raw material for the month of November
= 175000 × (25/100) × 5 kg
= 218750 Kg
Total raw material in kgs required for the month of November
= 175000 × 5
= 875000 Kg
Since they already have 218750 Kg of raw material, they need for the month of November
= 875000 - 218750
= 656250 Kg
However, they also need to keep in stock the 25% of raw material required for the month of December
25% of raw material required for December month
= = 110000 × (25/100) × 5 kg
= 137500 Kg
Total raw material, the corporation needs to purchase
= (656250 + 137500) KG
= 793750 Kg
Hope this is helpful.