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Question - Osage Inc. has actual sales for May and June and forecast sales for July, August, September, and October as follows:
Actual:
May 5,980 units
June 6,220 units
Forecast:
July 6,010 units
August 6,800 units
September 5,550 units
October 5,200 units
Required -
a. The firm's policy is to have finished goods inventory on hand at the end of the month that is equal to 65% of the next month's sales. It is currently estimated that there will be 3,906 units on hand at the end of June. Calculate the number of units to be produced in each of the months of July, August, and September.
b. Each unit of finished product requires 6 pounds of raw materials. The firm's policy is to have raw material inventory on hand at the end of each month that is equal to 70% of the next month's estimated usage. It is currently estimated that 25,700 pounds of raw materials will be on hand at the end of June. Calculate the number of pounds of raw materials to be purchased in each of the months of July and August.
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