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The budget committee for Amacom Company, with the help of the district sales manager, projects...

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Accounting

  1. The budget committee for Amacom Company, with the help of the district sales manager, projects sales of 80,000 units of its primary product next year. The budget committee and key executives have decided that finished goods inventory should be decreased from the 10,000 units expected at the end of the current year, to 7,000 units at the end of next year. Each unit of finished product requires three units of material MPS15 and six units of material NAV23. At the end of the current year, the inventory of material MPS15 is expected to be 10,000 units and material NAV23 is expected to be 20,000 units. The budget committee believes that these material inventories can be reduced by 80% during the coming year because of the newly installed supply chain system.

Required:

(a) Calculate the number of units Amacom expects to produce during the next year.

(b) Compute the number of units that should be purchased of each of the raw materials in order to produce the budgeted units and comply with inventory policy.

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