Question

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?

Answer 1

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.