Question

Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.

Beginning Inventory

Ending Inventory

Finished goods (units)

21,000

71,000

Raw material (grams)

51,000

41,000

Each unit of finished goods requires 2 grams of raw material. The company plans to sell 560,000 units during the year.

How much of the raw material should the company purchase during the year?

Garrison 16e Rechecks 2017-10-03

Multiple Choice

1,220,000 grams

1,231,000 grams

1,261,000 grams

1,210,000 grams

Answer 1

Answer :- Calculation of raw material should the company purchase during the year:-

Raw Material Purchase = Ending Inventory+Materials to be used - Beginning Inventory

Raw Material Purchase = 41,000 + (610,000*2) - 51,000

Raw Material Purchase = 41,000 + 1,220,000 - 51,000

Raw Material Purchase = 1,210,000 grams

So the correct answer is option D. ( 1,210,000 grams)

Working:-

units purchased = Ending inventory + units sold - Beginning Inventory

units purchased = 71,000 + 560,000 - 21,000

units purchased = 610,000

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