Estimate of Production and Materials Requirements
Tube-Magic Company makes a line of specialized plastic tubing items. During each of the next two years, it expects to sell 325,000 units. The beginning finished-goods inventory is 80,000 units. However, the target ending finished-goods inventory for each year is 35,000 units.
Each unit requires 5 feet of plastic tubing. At the beginning of the year, 200,000 feet of plastic tubing are in inventory. Management has set a target to having tubing materials on hand equal to three months of production requirements. Sales and production occur evenly throughout the year.
Instructions:
Compute the total targeted production of the finished product for the coming year. Compute the required purchases of tubing materials for the coming year. NOTE: Production in the following year should be 320,000 units of finished product.