Robusto Coffee Traders Inc.sells pre-packaged coffees to a variety of businesses throughout the East Coast.Robusto purchases the coffee in bulk from a wholesale distributor and packages the coffee themselves to sell to customers.The company expects to sell 500 000 and 600 000 half-kilo packages of coffee during 2008 and 2009 respectively.The company had 18 000 half-kilo packages on hand at the beginning of 2008,and the company has a policy of maintaining an ending inventory equal to 10 per cent of the packages needed for next year's expected sales.
How many packages of coffee should the company plan to purchase in 2008?
A) 560 000
B) 542 000
C) 458 000
D) 532 000

Question

Quizplus · Accepted Answer

To determine how many packages of coffee the company should plan to purchase in 2008, we need to calculate the total packages needed for 2008 sales and add the desired ending inventory.

Total packages needed for 2008 sales = 500,000 + 10% of 600,000 = 500,000 + 60,000 = 560,000

Desired ending inventory = 10% of 600,000 = 60,000

Therefore, the total packages the company should plan to purchase in 2008 is:

560,000 (total packages needed for 2008 sales) - 18,000 (packages on hand at the beginning of the year) + 60,000 (desired ending inventory) = 542,000

Therefore, the best choice is B.