Sun Corporation manufactures a special line of graphic tubing items. For each of the next two coming years, the company estimates it will sell 75,000 of this item. The beginning finished goods inventory contains 20,000 units. The target for each year's ending inventory is 10,000 units. Each of these units requires five feet of plastic tubing. The tubing inventory currently includes 50,000 feet of the required tubing. Materials on hand are targeted to equal two month's production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What is the production target in units for the coming year

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Business

Zorro

6 October, 07:49

Sun Corporation manufactures a special line of graphic tubing items. For each of the next two coming years, the company estimates it will sell 75,000 of this item. The beginning finished goods inventory contains 20,000 units. The target for each year's ending inventory is 10,000 units. Each of these units requires five feet of plastic tubing. The tubing inventory currently includes 50,000 feet of the required tubing. Materials on hand are targeted to equal two month's production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What is the production target in units for the coming year

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Cubby · Answer 1

Production Budget = Sales+Ending Inv-Op Inv

= 75000+10000-20000 = 65000 units

Ending Inv is Three Month Production = 65000 * (3/12) = 16250 unit

Ending Inv = 16250unit*5 Feet/unit = 81,250 feet

Mat Reqd for 65000unit = 65000*5 = 325,000 feet

SO Mat Reqd in 2008 = Mat Reqd + Ending Inv - Op Inv

= 325000 + 81250 - 50000

= 356,250 feet