Madison last month (December) sales were 10,000 units @ $40. The company estimates an increase of 1.5% in sales for January. An increase of 200 units for February (compared to January) and a reduction of 100 units for March (compared to February). The selling price is not expected to change. April sales projections are a 5% increase from December sales.

INVENTORY POLICY

FINISHED GOODS maintain an ending inventory equal to 25% of next month sales

December finished goods ending inventory was 6,000 units

Direct materials-maintain an ending inventory equal to 35% of next month production April production is estimated at 20,000

Material cost is $10 per pound. Each unit requires .25 pounds of materials and actual inventory is 1500 pounds

Labor cost is $14 per hour in each unit requires 30 minutes of labor

Fixed overhead is 62,517 monthly and variable overhead is 120% of direct labor cost

Calculate materials to be purchased in March