Each gallon of Old Guard, a popular aftershave lotion, requires two ounces of ocean scent. Budgeted production

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Each gallon of Old Guard, a popular aftershave lotion, requires two ounces of ocean scent. Budgeted production of Old Guard for the first three quarters of 2019 is as follows:

Quarter I ............. 10,000 gallons
Quarter II ............ 18,000 gallons
Quarter III ........... 11,000 gallons


Management’s policy is to have on hand at the end of every quarter enough ocean scent inventory to meet 25% of the next quarter’s production needs. At the beginning of Quarter I, 5,000 ounces of ocean scent were on hand.


Required:

a. Calculate the number of ounces of ocean scent to be purchased in each of the first two quarters of 2019.

b. Explain why management plans for an ending inventory instead of planning to purchase each quarter the amount of raw materials needed for that quarter’s production.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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Related Book For  book-img-for-question

Accounting What the Numbers Mean

ISBN: 978-1260565492

12th edition

Authors: David Marshall, Wayne McManus, Daniel Viele

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