Matz Ltd expects to sell 24,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Matz has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units. What is the number of finished units to be produced?

Question

Quizplus · Accepted Answer

To determine the number of finished units to be produced, we need to first calculate the total number of units that will be needed, which is:
Total units = expected sales + desired ending inventory - beginning inventory
Total units = 24,000 + 14,000 - 10,000
Total units = 28,000

Since two units of direct materials are required to produce one unit of finished product, we need to double the total units required to determine the amount of direct materials needed. This gives us:
Direct materials required = 2 x 28,000
Direct materials required = 56,000

Since Matz Ltd has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units, it has 10,000 units more than it needs. Therefore, the company does not need to purchase any additional direct materials for production.

Hence, the number of finished units to be produced is 28,000.

Matz Ltd Expects to Sell 24,000 Units of Finished Goods