Tidewater plans to sell 85,000 units of product no.794 in May,and each of these units requires three units of raw material.Pertinent data follow.
On the basis of the information presented,how many units of raw material should Tidewater purchase for use in May production?

Question

Tidewater plans to sell 85,000 units of product no.794 in May,and each of these units requires three units of raw material.Pertinent data follow. 
On the basis of the information presented,how many units of raw material should Tidewater purchase for use in May production?

Quizplus · Accepted Answer

Tidewater plans to sell 85,000 units of product no.794 in May, and each unit requires three units of raw material. Therefore, the total units of raw materials required for May production will be 85,000 x 3 = 255,000. However, Tidewater needs to factor in a buffer for any potential material waste, defects, or unexpected demand changes. Assuming a buffer of 5-10%, Tidewater should purchase 264,000 (255,000 x 1.1) units of raw material for use in May production. Therefore, the best choice is C.

Tidewater Plans to Sell 85,000 Units of Product No