Exercise 217 Your answer is incorrect Try again Rensing Ltd

Exercise 21-7 Your answer is incorrect. Try again Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows Month April May June Units 2,580 2,400 2,330 The target ending inventory of finished products is as follows March 31 April 30 May 31 June 30 2,020 2,200 2,130 2,330 2 units of material are required for each unit of finished product. Production for July is estimated at 2,660 units to start building inventory for the fall sales period Rensing\'s policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month\'s production requirements Raw materials are expected to cost $6 per unit throughout the period Calculate the May raw materials purchases in dollars Raw material purchases cost

Solution

Finished Product Quantity of May = May Sales- Opening Inventory of April + Closing Inventorty of May

= 2400-2200+2130 = 2330

Raw Material Required for May = 2330*2 = 4660

RAw Material Purchase Cost = 4660*6= 27960