[usmarinecorps]

Becker Question –

Hi guys, just looking for a quick explanation on how the purchases (squeeze) is arrived upon in this question.

Jordan Auto has developed the following production plan.

Month Units

January 10,000

February 8,000

March 9,000

April 12,000

Each unit contains three pounds of raw material. The desired raw material ending inventory each month is 120 percent of the next month’s production, plus 500 pounds. (The beginning inventory meets this requirement.) Jordan has developed the following direct labor standards for production of these units.

Department 1 ; Department 2

Hours per unit 2.0 0.5

Hourly rate $ ; 6.75 $12.00

How much raw material should Jordan Auto purchase in March?

a. 32,900 pounds.

b. 36,000 pounds.

c. 37,800 pounds.

d. 43,700 pounds.

ans is c

explanation

3/1 Begin bal. (9,000 × 120% × 3) + 500 = 32,900

Purchases (squeeze) 37,800

Subtotal 70,700

Transfer out (9000 × 3) (27,000)

3/31 End bal. (12,000 × 120% × 3) + 500 = $43,700

The department 1 and department 2 information is also irrelevant I am assuming?

Thanks for the help guys!

 

 

Ninja Notes and Ninja MCQ

BEC - 75
REG - 75
AUD - 79
FAR - 79

Done! Do not give up!

[Anonymous]

Hey buddy,

1) Beg bal: 32,900

2) Add pur: X

3) Sub out:(27,000)

4) End bal: 43,700

1) This is the amount required before March even begins which is “120 percent of the next month's production, plus 500 lbs”

2) This is the squeeze, like you said, that must be calculated at the end.

3) You must subtract out what's *actually* going to be transferred out, so it'll be like 1) above without the 120% requirement nor the 500 additional lb requirement

4) This will be a similar calculation as 1) above, except you'll be using the next month's “desired raw materials EI”

To calculate, there are many ways to do it for these “squeeze” questions but I like to SUBTRACT BI from EI and ADD TRANSFERS OUT. I suppose you could also subtract EI from BI and subtract transfers out & get a negative number.

And yes, the labor information is irrelevant–this stuff is likely inserted for copy & pasted questions asking about labor usage (in which the lbs & other info will be irrelevant). We gotta get used to going straight for the question, skimming for relevant data, and doing what we can in such a short time frame. The timing is my biggest pitfall 🙁

Let me know if you want any more clarification. I may not have explained it well enough.

[usmarinecorps]

thanks for the help Almond, it is clear now.

This stuff is getting to me lol, way too much stuff to focus on when so little of it will most likely be covered.

Ninja Notes and Ninja MCQ

BEC - 75
REG - 75
AUD - 79
FAR - 79

Done! Do not give up!

[Author]

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