XYZ has budgeted to sell 100 000 units of P for February 2008. It has an opening inventory of 20 000 units of P and would like a closing inventory of 30 000 units. Each unit of P requires 2 kg of raw material Y. Inventory of Y at the beginning of the month is 5000 kg. Assuming the sales budget is met and the desired closing inventory of P is achieved, how many kilograms of Y need to be purchased during February, in order to have a closing balance of 8000 kg?
A) 113 000
B) 117 000
C) 223 000
D) 183 000

Question

Quizplus · Accepted Answer

To calculate the required purchase of Y, first determine the production needs: 100,000 units sold + 30,000 desired closing inventory - 20,000 opening inventory = 110,000 units to be produced. Each unit requires 2 kg of Y, so 110,000 units x 2 kg/unit = 220,000 kg of Y needed for production. To achieve a closing inventory of 8,000 kg of Y, the total Y needed is 220,000 kg + 8,000 kg = 228,000 kg. With an opening inventory of 5,000 kg, the purchase required is 228,000 kg - 5,000 kg = 223,000 kg.

XYZ Has Budgeted to Sell 100 000 Units of P