Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 4,000 units of Prime and 1,100 units of Luxuria in 2019.The following estimates are given for 2019:

Nantucket had an inventory of 230 units of Prime and 125 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 360 units of Prime and 210 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $15. There were 100 units of Crimpson in stock at the end of 2018.The management does not want to have any stock of Crimpson at the end of 2019.
What is the amount budgeted for purchase of Crimpson in 2019?

Question

Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 4,000 units of Prime and 1,100 units of Luxuria in 2019.The following estimates are given for 2019:

Nantucket had an inventory of 230 units of Prime and 125 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 360 units of Prime and 210 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $15. There were 100 units of Crimpson in stock at the end of 2018.The management does not want to have any stock of Crimpson at the end of 2019.
What is the amount budgeted for purchase of Crimpson in 2019?

Quizplus · Accepted Answer

Budgeted amount for purchase of Crimpson = [$15 × (1,185 units (Luxuria units produced) - 100 units (Units in hand)] = $16,275; Number of units of Luxuria to be produced = [1,100 units (Estimated sales) + 210 units (Budgeted ending inventory) - 125 units (Opening inventory)] = 1,185 units.

Nantucket Industries Manufactures and Sells Two Models of Watches, Prime