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26 December, 20:12

Concord Corporation required production for June is 212000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 390000 and 410000 pounds, respectively. How many pounds of direct material Z must be purchased?

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  1. 26 December, 20:33
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    The purchases of material Z should be of 656000 pounds.

    Explanation:

    The purchases of material Z should be such that they meet the desired closing inventory requirement of product Z along with producing enough units to meet the production requirements for the period which are left after the opening inventory has been used. Or we can also say that the purchases should be enough to meet the closing inventory and the Production requirements less the opening inventory.

    Thus, purchases = Closing Inventory + Total Production Requirements - Opening inventory

    The amount of material Z needed to produce 212000 units = 212000 * 3 = 636000 pounds

    Purchases = 410000 + 636000 - 390000

    Purchases = 656000 pounds
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