Estimating Production Costs
production process requires 3 square meters of plastic sheeting and a metal
pole. The plastic sheeting costs $0.50 per square meter and each metal pole
costs $1.00. At the beginning of the month, the company has 5,000 square feet
of plastic and 1,000 poles in raw materials inventory.
The preferred raw material amount at the end of the month is
3,000 square feet of plastic sheeting and 600 poles. The company has 300
finished umbrellas in inventory at the beginning of the month and plans to have
200 finished umbrellas at the end of the month. Sales in the coming month are
expected to be 5,000 umbrellas.
a. How many umbrellas must the company produce to meet
demand and have sufficient ending inventory?
b. What is the cost of materials that must be purchased?
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