The Sun Company manufactures a special line of graphic tubing items.The company estimates it will sell 75,000 units of this item in 2012.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 10,000 units.Each unit requires five feet of plastic tubing.The tubing inventory currently includes 70,000 feet of the required tubing.Materials on hand are targeted to equal three months' production.Any shortage in materials will be made up by the immediate purchase of materials.Sales take place evenly throughout the year.What are the materials requirements (in feet)for 2012?

Question

Quizplus · Accepted Answer

To calculate the materials requirements, we need to use the following formula:

Materials Required = (Expected Sales + Target Ending Inventory) - Beginning Inventory

Expected Sales = 75,000 units / 12 months = 6,250 units per month
Target Ending Inventory = 10,000 units
Beginning Inventory = 20,000 units

Therefore, Materials Required = (6,250 + 10,000) - 20,000 = 3,250 units

Since each unit requires five feet of tubing, the materials requirements in feet will be:

Materials Required in Feet = 3,250 units x 5 feet per unit = 16,250 feet per month

Since materials on hand are targeted to equal three months' production, the materials inventory should be:

Materials Inventory = 16,250 feet per month x 3 months = 48,750 feet

Therefore, the total materials requirements for 2012 will be:

Total Materials Required = 16,250 feet per month x 12 months = 195,000 feet

Adding the current tubing inventory of 70,000 feet,

Total Material Requirements = 70,000 + 195,000 = 265,000 feet

Therefore, the answer is B) 336,250.

The Sun Company Manufactures a Special Line of Graphic Tubing