Comma Manufacturing budgets on an annual basis for its fiscal year.The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2016 to June 30, 2017: $$\text { Raw Materials } \frac { \text { June } 30,2017 } { 3,000 \text { kilos } } \quad \frac { \text { June } 30,2016 } { 2,000 \text { kilos } }$$ Three kilos of raw materials are needed to produce each unit of finished product.If Comma Manufacturing plans to produce 560,000 units during the 2016-2017 fiscal year, how many kilos of materials will the company need to purchase for its production during the year?
A)1,681,000
B)1,686,000
C)1,680,000
D)1,678,000

Question

Quizplus · Accepted Answer

The company needs to purchase enough materials to cover both the production for the year and the increase in ending inventory. The increase in ending inventory is 3,000 kilos - 2,000 kilos = 1,000 kilos. The company plans to produce 560,000 units, and each unit requires 3 kilos of materials. Therefore, the company needs to purchase 560,000 units * 3 kilos/unit = 1,680,000 kilos of materials. Adding the increase in ending inventory, the company needs to purchase 1,680,000 kilos + 1,000 kilos = 1,681,000 kilos of materials.