Victoria Corporation manufactures quality vases. Budgeted sales and production data for the vases are as follows: Each vase requires one pound of clay in its manufacture. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 10% of the production needs for the following month. At the beginning of January, 230 pounds of clay were in inventory. How many pounds of clay would Victoria Corporation need to purchase in February (Month 2)?

Question

Victoria Corporation manufactures quality vases. Budgeted sales and production data for the vases are as follows:  Each vase requires one pound of clay in its manufacture. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 10% of the production needs for the following month. At the beginning of January, 230 pounds of clay were in inventory. How many pounds of clay would Victoria Corporation need to purchase in February (Month 2)?

Quizplus · Accepted Answer

Step 1: Calculate the production needs for February.
Budgeted sales for February = 3,500 vases
Desired ending inventory of vases for February = 10% of next month's production needs = 10% * 3,500 = 350 vases
Production needs for February = Budgeted sales for February + Desired ending inventory of vases for February = 3,500 + 350 = 3,850 vases

Step 2: Calculate the total pounds of clay needed for February's production.
Each vase requires one pound of clay, so total pounds of clay needed for February = Pounds of clay per vase * production needs for February = 1 * 3,850 = 3,850 pounds

Step 3: Calculate the amount of clay needed to be purchased in February.
Beginning inventory of clay in January = 230 pounds
Desired ending inventory of clay for February = 10% of production needs for February = 10% * 3,850 pounds = 385 pounds
Total clay needed for February = Pounds of clay needed for February's production + Desired ending inventory of clay for February - Beginning inventory of clay in January = 3,850 + 385 - 230 = 4,005 pounds
Therefore, Victoria Corporation would need to purchase 4,005 – 175 = 2830 pounds of clay in February. Answer: D

Victoria Corporation Manufactures Quality Vases