Planning Systems, has forecast the following unit sales and production for the next year, by quarter: A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories.
How much material B must be purchased in quarter 1?
A) 264
B) 196
C) 204
D) 256

Question

Quizplus · Accepted Answer

To calculate the amount of material B needed for purchase in quarter 1, we need to consider the production needs for quarter 1 and the inventory requirement for quarter 2. Assuming the production for quarter 1 is P1, the material B needed for production is 2 * P1. Additionally, 20% of the material B needed for quarter 2 production (2 * P2) should be on hand at the end of quarter 1. Therefore, the total material B needed for quarter 1 is 2 * P1 + 0.2 * 2 * P2. Solving this with the given production numbers will yield the correct amount to be purchased.

Planning Systems, Has Forecast the Following Unit Sales and Production