Whistle manufactures referee whistles. At the end of February, Whistle has 2,000 pounds of steel for whistles inventory. Whistle expects to produce and sell 50,000 whistles in March. Each whistle requires a standard quality of .2 lbs of steel. Whistle wants to have 5,000 pounds of steel in inventory at the end of March. Whistle has no whistles in beginning finished goods inventory and doesn’t plan to have any whistles in ending finished goods inventory. Each pound of steel has a standard cost of $7. Prepare Whistle’s purchase budget for steel in March. How much does Whistle expect to spend on steel in March?

Question

Whistle manufactures referee whistles. At the end of February, Whistle has 2,000 pounds of steel for whistles inventory. Whistle expects to produce and sell 50,000 whistles in March. Each whistle requires a standard quality of .2 lbs of steel. Whistle wants to have 5,000 pounds of steel in inventory at the end of March. Whistle has no whistles in beginning finished goods inventory and doesn’t plan to have any whistles in ending finished goods inventory. Each pound of steel has a standard cost of $7. Prepare Whistle’s purchase budget for steel in March. How much does Whistle expect to spend on steel in March?

Answer 1

To prepare Whistle's purchase budget for steel in March, we need to calculate the amount of steel needed for production and the desired ending inventory of steel.

First, let's calculate the steel needed for production in March. Whistle plans to produce and sell 50,000 whistles in March, and each whistle requires 0.2 lbs of steel.

Steel needed for production = Total number of whistles * Steel required per whistle
Steel needed for production = 50,000 whistles * 0.2 lbs/whistle
Steel needed for production = 10,000 lbs

Next, let's calculate the desired ending inventory of steel for March. Whistle wants to have 5,000 pounds of steel in inventory at the end of March.

Desired ending inventory of steel = 5,000 lbs

Now, let's calculate the total steel required, which is the sum of steel needed for production and the desired ending inventory.

Total steel required = Steel needed for production + Desired ending inventory of steel
Total steel required = 10,000 lbs + 5,000 lbs
Total steel required = 15,000 lbs

Finally, let's calculate the steel to be purchased, which is the difference between the total steel required and the beginning inventory of steel.

Steel to be purchased = Total steel required - Beginning inventory of steel
Steel to be purchased = 15,000 lbs - 2,000 lbs
Steel to be purchased = 13,000 lbs

Now that we know the steel to be purchased, we can calculate the amount Whistle expects to spend on steel in March.

Amount spent on steel = Steel to be purchased * Cost per pound of steel
Amount spent on steel = 13,000 lbs * $7/lb
Amount spent on steel = $91,000

Therefore, Whistle expects to spend $91,000 on steel in March.