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B DeLoan Corporation uses a six-month moving average to calculate material scrap rate. Both the auditor and technical analyst concur with the use of this procedure. Both have also validated the available data.
Material Required $100,000 $100,000 $69,000 $105,000 $89,000 $88,000 $99,000
1. What would you estimate the scrap rate to be using a 6-month moving average?
2. Using that scrap rate, what would be your material estimate for a new contract for the item when the material required for the finished product is $90,000?
3. Is your estimate in Question 2 reasonable?
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