Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
How many units of steel are expected in the material inventory at the end of the second month?

Question

Quizplus · Accepted Answer

To calculate the required amount of steel for the next two months, we need to add the steel required for each month.

Total steel required for the next two months = (20 x 500) + (20 x 600) = 20,000

To calculate the ending inventory of steel, we need to add the beginning inventory of steel and the steel received from production and then subtract the steel used in production.

Ending inventory of steel = Beginning inventory of steel + Steel received from production - Steel used in production

For the first month: 
Beginning inventory of steel = 30 units 
Steel received from production = (600 x 1) = 600 units 
Steel used in production = (20 x 500) = 10,000 units

So, 
Ending inventory of steel after the first month = 30 + 600 - 10,000 = -9,370 units

Since the ending inventory cannot be negative, we assume that the deficit steel will be covered in the next month from production, and the steel inventory will increase by 5 units.

For the second month: 
Beginning inventory of steel = 25 units (30 - 5 = 25) 
Steel received from production = (500 x 1) = 500 units 
Steel used in production = (20 x 600) = 12,000 units

So, 
Ending inventory of steel after the second month = 25 + 500 - 12,000 =  -11,475 units

Again, since the ending inventory cannot be negative, we assume that the deficit steel will be covered in the next month from production, and the steel inventory will increase by 5 units.

Therefore, the ending inventory of steel after the second month will be: 
Ending inventory of steel = Beginning inventory of steel + Steel received from production - Steel used in production 
= 30 + 600 + 5 - 10,000 - 12,000 - 5 = 40 units.

Thus, the answer is option C.

Roaming Vehicles Company Manufactures Buggies