Hargrow, Inc.makes and sells a single product, buckets.It takes 30 ounces of plastic to make one bucket.Budgeted production of buckets for the next three months is as follows: August 90,000 units, September 75,000 units, October 65,000 units.The company wants to maintain monthly ending inventories of plastic equal to 10% of the following month's production needs.On August 31, 195,000 ounces of plastic were on hand.The cost of plastic is $0.03 per ounce.How much is the ending inventory of plastic to be reported on the company's balance sheet at September 30?
A)$195,000
B)$5,850
C)$6,750
D)$7,500

Question

Quizplus · Accepted Answer

The ending inventory of plastic for September is calculated based on 10% of October's production needs. October needs 65,000 buckets, each requiring 30 ounces of plastic, so the total need is 1,950,000 ounces. 10% of this is 195,000 ounces. At $0.03 per ounce, the cost is 195,000 ounces * $0.03 = $5,850.