Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter: 1^st 2^nd 3^rd 4^th
Production 150 160 140 100
Sales 120 140 150 120
The firm has beginning inventories as follows:
Finished goods 50 units
Direct material A 100
Direct material B 100
A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories.
What is the ending inventory for material B in quarter 1?

Question

Quizplus · Accepted Answer

To calculate the ending inventory for material B in quarter 1, first determine the production needs for quarter 2, which is 160 units. Since each unit requires 2 units of material B, the total requirement for quarter 2 is 320 units. 20% of this is 64 units, which is the required ending inventory for material B in quarter 1.