Answer: Purchases of raw materials for February would be budgeted to be 18870 Pound.
Explanation:
Given that,
Sales in January = 15,500 units
Sales in February = 21000 units
Sales in March = 18500 units
Production in units = 18,500 19,500 17,400
Material is required for each finished unit = 1 Pound
Inventory of materials at the end of each month = 30% of the following month's production needs
From the above information,
Total material required for units in February = 19500 × 1 Pound
= 19500 Pound
Desired ending inventory = 30% of 17400 = 5220
Beginning material inventory = 30% of February production units (19500)
= 5850
Purchases of raw materials for February would be budgeted = Total material required for units in February + Desired ending inventory - Beginning material inventory
= 19500 + 5220 - 5850
= 18870 Pound
