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:

Answer 1

Answer:

Raw material purchases (in pounds) 20,275

Explanation:

The computation of the purchase of raw material made for February month is shown below:

Production in Units         20,600    

Multiplied by Raw material needed per unit (in pounds) 1    

Total raw material required (in pounds) 20,600    

Add: closing Inventory (25% of 19300 pounds) 4,825    

Less: Opening Inventory (25% of 20600 pounds) 5,150    

Raw material purchases (in pounds) 20,275