Question

Each unit of finished goods requires 4 pounds of raw materials. The ending finished goods inventory equals 10% of the following month's sales. The ending raw materials inventory equals 40% of the following month’s raw materials production needs. If 50,600 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

Answer 1

Answer:

42,056 pounds

Explanation:

The computation of budgeted raw material purchases is shown below:-

Budgeted unit sale                        8,700

Add: desired ending inventory     1,260

(10% × 12,600)

Total needs                                    9,960

Less: Beginning inventory             (870)

(8,700 × 10%)

Production in may                          9,090

Pounds for material                        4

material for production                   36,360  

(9,090  × 4)

Add: Desired ending inventory

of raw material                                 20,240

(50,600 × 40%)

Total needs                                       56,600

Less: Beginning ending inventory

of raw material                                (14,544)

(36,360 × 40%)

Raw material purchase                   42,056 pounds