Bowler and Perkiss Limited manufactures a product, the XPZ 100, that requires 6 kg of metal per unit. The production budget for the XPZ 100 is 320 units in February 20X1 and 300 units in March 20X1.
The directors have decided to adopt a policy of reducing inventory holdings where possible.From February 20X1 onwards they intend to hold in inventory at the beginning of the month exactly 40% of the raw material required for the current month's production.
The amount of metal in inventory at the beginning of February was 1510 kg.
What quantity of metal must be purchased during February in order to comply with the directors' new policy?

Question

Quizplus · Accepted Answer

To calculate the metal required for February:  - Production for February = 320 units  - Metal required = 320 units * 6 kg/unit = 1920 kg  According to the policy, inventory at the beginning of February should be 40% of February's requirement:  - 40% of 1920 kg = 768 kg  The beginning inventory in February is 1510 kg, which is more than required.  - Excess inventory = 1510 kg - 768 kg = 742 kg  Therefore, metal needed for February = 1920 kg - 742 kg = 1178 kg  Since the inventory policy requires 768 kg at the start of March, we need to purchase enough to meet this requirement:  - Required inventory for March = 40% of March's production (300 units * 6 kg/unit) = 720 kg  Thus, total metal to be purchased in February = 1178 kg + 720 kg - 742 kg = 1130 kg.

Bowler and Perkiss Limited Manufactures a Product, the XPZ 100