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Hi,
I’ve had a go at Example 3 – Cashflow Forecast under Chapter 15 Cash Management.
I would like to understand if ‘Stocks of materials at the end of the month’ is not taken into account when working through the example.I understand the Inventory requirements for each month, and what I thought was :
January : Production 10200 units
Closing Material needs to be 11,200kg (50% of Feb material requirements)Therefore, material cost for January (Cash outflow in Feb)
21400kg x $2.40 per kg [10200 units x2 + 1000kg to meet 50% opening material inventory]
= $51,360
Answer suggests :
10200 units x 2 x $2.40 per kg
= $48,960I hope it’s making sense on where I’m getting confused.
Could you please explain why it wouldn’t be $51,360?Thanks,
Simon
Stocks of finished goods at the end of each month are required to be 20% of the expected sales for
the following month. Stocks of materials at the end of each month are required to be 50% of the
materials required for the following month’s production.Hi,
I think I’ve mentioned in a previous forum post that there is an error in the question and that I’ll rework it when I get the opportunity.
Thanks
Please, can someone help solve this.
Josh Chemic Company Limited (Josh Chemic) manufactures a wide variety of detergents for use in hospitals. The operations manager of Josh Chemic has recently been approached by a new manufacturer based in a newly industrialized country who has offered to produce three of the detergents at their factory. The following cost and price information has been provided.
Detergent Aromatic Enzyme PresoakProduction (units)20,000 40,000 80,000
GH¢ GH¢ GH¢Direct mat.cost, per unit 6.80 7.00 6.40 Direct labor cost,per unit 7.60 7.80 6.80 Direct expense, per unit 6.40 6.60 6.20 Fixed cost per unit. 6.80 7.00 6.40
Selling price each 25.00 30.00 12.00 Imported price. 16.75 25.20 12.00All fixed costs are directly attributable fixed costs.
Required
a) Calculate i. the profits Josh Chemic will make by producing each of the detergents in-house.
ii. the profits Josh Chemic will make by purchasing the detergents from the overseas producer.
iii. What saving (increased cost) per unit would be made/(incurred) if the detergents were purchased from the overseas producer?
b) Advice Josh Chemic whether the detergents should be produced in-house or outsourced to the overseas producer.
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