Figure 8-3
Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months.
-Refer to Figure 8-3. How many units of steel are expected in the material inventory at the end of the second month?
A) 30 units
B) 45 units
C) 40 units
D) 35 units

Question

Quizplus · Accepted Answer

Using the information given, we can set up the following table:

| Month | Planned Production | Units of Wood Needed | Units of Steel Needed |
|-------|--------------------|---------------------|----------------------|
| 1     | 500                | 10,000              | 500                   |
| 2     | 600                | 12,000              | 600                   |

Beginning inventory: 
- Wood: 4,000 units
- Steel: 30 units

Expected changes during the two months:
- Wood: decrease of 500 units each month [4,000 - (2 x 500) = 3,000 units at the end of the second month]
- Steel: increase of 5 units each month [30 + (2 x 5) = 40 units at the end of the second month]

To find the expected units of steel at the end of the second month, we add the beginning inventory to the total units needed over the two months, then subtract the expected increase:
30 + 500 + 600 - 40 = 1,090

Therefore, there will be 40 units of steel in the material inventory at the end of the second month.

Figure 8-3 Roaming Vehicles Company Manufactures Buggies. Manufacturing a Buggy Takes 20