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he company’s raw material supplier has informed them that due to restrictions on the manufacture of the material, the supply to the company will be restricted to 6,600,000 kg per quarter for the foreseeable future beginning from quarter 1. Kindred decides to purchase the maximum amount of material available in each quarter and build up inventory of finished goods whenever possible. Under these restrictions the budgeted opening finished goods inventory in quarter 3 will be 325,000 units.

000
Quarter 1 1,950
Quarter 2 2,275
Quarter 3 3,250
Quarter 4 2,275
(5) Selling price is $56 per unit.

(6) Kindred Co aims to maximise its profits

Task 4 2 marks
The company’s raw material supplier has informed them that due to restrictions on the manufacture of the material, the supply to the company will be restricted to 6,600,000 kg per quarter for the foreseeable future beginning from quarter 1. Kindred decides to purchase the maximum amount of material available in each quarter and build up inventory of finished goods whenever possible. Under these restrictions the budgeted opening finished goods inventory in quarter 3 will be 325,000 units.

Calculate a revised closing finished goods inventory for Quarter 3 taking into account the restrictions on the raw material supply.

Revised closed finished goods inventory is:

Ans. (4) Closing inventory quarter 3 with restricted materials

Opening finished good inventory = 325,000 units

Production (6,600,000 kg ÷ 3) = 2,200,000 units.

Demand of 3,250,000 units exceeds production and the opening inventory. Therefore there will be no closing inventory (i.e. 0 units).

My ans. Sales demand (forecasted) 3250000
OPening units 3250000
Closing 2200000 (6600000/3)

Could you help me to understand how they have calculated the answer and why my answer is not correct?