Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 4,000 units of Prime and 1,100 units of Luxuria in 2019. The following estimates are given for 2019: Prime Luxuria Selling price $200 $500 Direct materials 20 50 Direct labor 70 160 Manufacturing overhead 90 100 Nantucket had an inventory of 230 units of Prime and 125 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 360 units of Prime and 210 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $15. There were 100 units of Crimpson in stock at the end of 2018. The management does not want to have any stock of Crimpson at the end of 2019. What is the amount budgeted for purchase of Crimpson in 2019?

Question

Saul Massey

Business

29 April, 23:44

Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 4,000 units of Prime and 1,100 units of Luxuria in 2019. The following estimates are given for 2019: Prime Luxuria Selling price $200 $500 Direct materials 20 50 Direct labor 70 160 Manufacturing overhead 90 100 Nantucket had an inventory of 230 units of Prime and 125 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 360 units of Prime and 210 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $15. There were 100 units of Crimpson in stock at the end of 2018. The management does not want to have any stock of Crimpson at the end of 2019. What is the amount budgeted for purchase of Crimpson in 2019?

+4

Answers (1)

Know the Answer?

Kristen Sharp · Answer 1

Purchases = 1,085

Explanation:

Giving the following information:

It expects to sell 1,100 units of Luxuria in 2019

Beginning inventory:

Luxuria = 125

Ending inventory:

Luxuria = 210 units of Luxuria.

Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $15. There were 100 units of Crimpson in stock at the end of 2018.

First, we need to determine the number of Luxuria to be produced:

Production = sales + desired ending inventory - beginning inventory

Production = 1,100 + 210 - 125 = 1,185

Now, we can determine the number of Crimpson to be purchased:

Purchases = production + desired ending inventory - beginning inventory

Purchases = 1,185 + 0 - 100

Purchases = 1,085