Question
Scot Company plans to sell 400 000 units of finished product in July of 20x4. Management anticipates a growth rate in sales of 5 per
Scot Company plans to sell 400 000 units of finished product in July of 20x4. Management anticipates a growth rate in sales of 5 per cent per month. The desired monthly ending inventory in units of finished product is 80 per cent of the next month's .estimated sales. There are 300 000 finished units in the inventory on 30 June 20x4. Each unit of finished product requires 4 kg of direct material at a cost of R1 ,50 per kg. There are 1 600 000 kg of direct material in the inventory on 30 June 20x4. Required: 2.1 Calculate Scot Company's production requirement in units of finished product for the three-month period ending 30 September 20x4. (7) 2.2. Independent of your answer to Requirement 2.1, assume the company plans to produce 1 200 000 units of finished product in the three-month period ending 30 September 20x4. The firm will have direct materials inventory at the end of the three-month period equal to 25 per cent of the direct material used during that period. Calculate the estimated cost of direct materials purchases for the three month period ending 30 September 20x4. (4)
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