Question

Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds of raw material K, which costs $5 per pound. Each month’s ending inventory of raw materials should be 30% of the following month’s budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute budgeted cost of purchases for raw material K for June.

Answer 1

Answer:

The budgeted cost of purchases for raw material K for June is 1,212 pounds.

Explanation:

Computation of budgeted cost of purchase for raw material is shown below

= Required production + ending raw material inventory - opening raw material inventory

where,

Required production = June units × required units

                                = 300 × 4 pounds

                                = 1,200 pounds

Ending raw material inventory = 30 % of July units × required units

                                                = 30% × 310 units × 4 pounds

                                                = 372 pounds

Opening raw material inventory = 360 pounds

Now, put these values on the above equation

So, raw material purchase = 1,200 + 372 - 360 = 1,212 pound

Thus, the budgeted cost of purchases for raw material K for June is 1,212 pounds.