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Andru [333]
3 years ago
12

A sporting goods manufacturer budgets production of 57,000 pairs of ski boots in the first quarter and 48,000 pairs in the secon

d quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 25% of the following quarter's material needs. Beginning inventory for this material is 28,500 kg and the cost per kg is $7. What is the budgeted materials purchases cost for the first quarter?
Business
2 answers:
bezimeni [28]3 years ago
7 0

Answer:

The budgeted material purchase cost for the first quarter would be $626,500

Explanation:

In the first quarter , the consumption of material for pair of ski would be equal to ,

= production required x raw materials required per unit

=  57,000 x 2

= 114,000 kg

In the second quarter , the consumption of materials for pair of ski would be equal to ,

= production required x raw materials required per unit

= 48,000 x 2

= 96,000 kg

As per the question company expects to end raw material inventory equal to 25% of the next quarters material needs , so

= 25% x consumption requirement of second quarter

= 25% x 96,000

= 24,000 kg

given that the beginning inventory for his material is 28,500 and we have taken out closing inventory ( 24,000 kg ) , so with this purchase can be taken out

Consumption = Opening inventory + Purchase - Closing inventory

94,000 = 28,500 + Purchase - 24,000

Purchase = 89,500 kg

Now multiplying this purchase with the cost per kg we will get the budgeted material purchase cost

= 89,500 x 7

= $626,500

umka2103 [35]3 years ago
3 0

Answer:

Cost of purchase for first quarter = $766,500  

Explanation:

Total production of current quarter = 57,000 pairs

Raw material required for above = 57,000 X 2 kg per pair = 114,000 kg

Less: Opening inventory of raw material 28,500 kg = 114,000 - 28,500 = 85,500 kg required for quarter 1

Also provided that closing inventory shall be 25% of total raw material required for next quarter.

Raw material required in second quarter = 48,000 pairs X 2 kg each = 96,000 kg

25% of above = 96,000 X 25% = 24,000 kg

Total raw material to be purchased in current quarter that is first quarter = 85,500 kg + 24,000 kg = 109,500 kg

Rate not provided assumed to be same as of opening inventory that is $7 per kg, therefore cost of purchase for first quarter = 109,500 kg X $7 = $766,500  

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