Southern Inc. produces a line of salsas. Southern Inc. estimated production of jars of salsa for the third quarter of the year is as follows:
Each jar requires 0.25 kg of peppers. Southern Inc. prefers to buy the freshest peppers, so its policy is to have just 5% of the following month's production needs in ending inventory. On July 1, the company had 1,200 kg of peppers in inventory. Southern Inc. pays $0.40 per kilogram of peppers. It buys all peppers on account and typically pays 50% of a month's purchases in that month, and the remaining 50% the following month. $$\begin{array} { l l }
\text { July } & 80,000 \
\text { August } & 90,000 \
\text { September } & 70,000
\end{array}$$
-Refer to the Figure.How many kilograms of peppers will be purchased during the month of August?

Question

Southern Inc. produces a line of salsas. Southern Inc. estimated production of jars of salsa for the third quarter of the year is as follows:
Each jar requires 0.25 kg of peppers. Southern Inc. prefers to buy the freshest peppers, so its policy is to have just 5% of the following month's production needs in ending inventory. On July 1, the company had 1,200 kg of peppers in inventory. Southern Inc. pays $0.40 per kilogram of peppers. It buys all peppers on account and typically pays 50% of a month's purchases in that month, and the remaining 50% the following month. $$\begin{array} { l l } 
\text { July } & 80,000 \
\text { August } & 90,000 \
\text { September } & 70,000
\end{array}$$
-Refer to the Figure.How many kilograms of peppers will be purchased during the month of August?

Quizplus · Accepted Answer

To calculate the kilograms of peppers to be purchased in August:  1. Calculate the production needs for August: 90,000 jars * 0.25 kg/jar = 22,500 kg.  2. Calculate the ending inventory for August (5% of September's needs): 70,000 jars * 0.25 kg/jar * 5% = 875 kg.  3. Total needs for August: 22,500 kg + 875 kg = 23,375 kg.  4. Subtract the beginning inventory for August (ending inventory of July): 1,200 kg.  5. Peppers to be purchased in August: 23,375 kg - 1,200 kg = 22,175 kg.  6. Since the closest option is 22,250 kg, this is the correct choice.

Southern Inc July 80,000 August 90,000 September 70,000\begin{array} { l l } \text { July } & 80,000 \\\text { August } & 90,000 \\\text { September } & 70,000\end{array} July August September ​80,00090,00070,000​

Southern Inc $\begin{array} { l l } \text { July } & 80,000 \\\text { August } & 90,000 \\\text { September } & 70,000\end{array}$