How many units of product must be produced in 2015

Question

Odana plans to sell 90,000 units of its only product at a price of $16 each.
Assume that there will be 7,500 units of the product in inventory at January 1, 2015.
During 2015, the inventory quantity is to be increased 15% (so the ending inventory is 15% higher than the beginning inventory).

• Two types of materials are used to make the product.
  • Material A:
    • Each product requires 3 ounces of Material A.
    • Material A costs $.40 (40 cents) per ounce.
    • Assume that on January 1, 2015, there will be 10,000 ounces of Material A in the Raw Materials Inventory.
    • During 2015, the inventory quantity of Material A will be increased 10% (so the ending inventory is 10% higher than the beginning inventory).
  • Material B:
    • Each product requires 2 ounces of Material B.
    • Material B costs $.36 (36 cents) per ounce.
    • Assume that on January 1, 2015, there will be 5,000 ounces of Material B in the Raw Materials Inventory.
    • During 2015, the inventory quantity of Material B will be increased 10% (so the ending inventory is 10% higher than the beginning inventory).

• Each unit of product can be produced in 20 minutes of direct labor time.
• Direct labor is paid at the rate of $12.00 per hour.
• The variable manufacturing overhead is applied at the rate of $2.60 per direct labor hour.
• The fixed manufacturing overhead for the year is estimated at $175,000.

Required:

1. How many units of product must be produced in 2015?
2. How many ounces of Material A must be purchased during 2015? What is the cost of the planned purchases?
3. How many ounces of Material B must be purchased during 2015? What is the cost of the planned purchases?
4. How many direct labor hours must be planned for 2015 to support production? What is the cost of the planned direct labor?
5. What is the planned manufacturing overhead cost for the year?