Question

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 25% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:Garrison 16e Rechecks 2017-10-03A. 20,925 poundsB. 20,575 poundsC. 20,275 poundsD. 18,325 pounds

Answer 1

Answer: Option C = 20, 275 pounds

Explanation:

First, the first part of the question is missing and it as follows:

The following are budged data

                                         January             February        March

Sales in Units                    16,600           23,200           19,600

Production in Units         19,600             20,600           19,300

Solution:

The qestion is to deermine Purchases of raw materials for the month of February

The formula is as follows:

Production Units in February x the raw materials required per Unit in Pounds + The Closing inventory - The Opening Inventory of materials

Using the formula we know the following

Productoin Units in February = 20,600

Raw Material required per Unit = 1 pound

Closing Inventory = 25% of March (19,300) = 4,825

Opening Inventory = 25% or February (20,600) = 5,150

Based on the computed figures therefore,

Production Units in February

= 20,600 x 1 pound = 20,600 + 4,825 - 5,150 = 20,275 which is Option C