Answer the Following Questions Using the Information Below:
Meridian Industries

question 169

Multiple Choice

Answer the following questions using the information below:
Meridian Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The following estimates are given for 2016:
$$\begin{array} { l r r } & \text { Prime } & \text { Luxuria } \\\text { Selling price } & \$ 200 & \$ 500 \\\text { Direct materials } & 20 & 50 \\\text { Direct labor } & 40 & 150 \\\text { Manufacturing overhead } & 40 & 100\end{array}$$ Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of 2015. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 200 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $10. There were 100 units of Crimpson in stock at the end of 2015.The management does not want to have any stock of Crimpson at the end of 2016.
-What is the amount budgeted for purchase of Crimpson in 2016?

• A) $31,500
• B) $10,250
• C) $30,500
• D) $10,000

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Definitions:

Capital

Resources or assets that are used in the production of goods and services, including physical assets like machinery and buildings, and intangible assets like patents.

Fixed-Proportion

A production process in which the inputs are used in fixed ratios, with no substitution possible between them.

Perfect Substitutes

Goods or services that can be used in exactly the same way, where the consumer is indifferent between the two and will choose the cheaper one.

Scale

The size, extent, or level of something, typically used in the context of production or operations to indicate magnitude or capacity.