Question

The following are budgeted data: January February March Sales in units 15,000 20,000 18,000 Production in units 18,000 19,000 16,000 One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

Answer 1

Answer:

The purchase of raw materials for the month of February which is budgeted is 18,400

Explanation:

Computing the purchase of raw materials for the month of February which is budgeted is as:

Raw material required to meet the production = Needed production in units × Raw materials needed per unit

where

Needed production in units 19,000

Raw materials needed per unit is 1 pound

Putting the values above:

= 19,000 ×  1

= 19,000

Computing total raw materials required as:

Total raw materials required = Raw material required to meet the production + Desired ending raw material inventory

where

Raw material required to meet the production is 19,000

Desired ending raw material inventory = 16,000 × 1 × 20%

= 3,200

So,

Total raw materials required = 19,000 + 3,200

= 22,200

Computing raw material to be purchased is as:

Raw material to be purchased = Total raw materials required  - Beginning raw materials inventory

where

Total raw materials required is 22,200

Beginning raw materials inventory = 19,000 × 1 × 20%

= 3,800

So,

= 22,200 - 3,800

Raw material to be purchased  = 18,400