The following are budgeted data:
January | February | March | |||||||
Sales in units | 16,900 | 23,800 | 19,900 | ||||||
Production in units | 19,900 | 20,900 | 20,000 | ||||||
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:
Beginning inventory of Raw material in February = (20900 units x 1 pounds) x 25% = 5225 pounds
Ending inventory of Raw material in February = (20000 units x 1 pounds) x 25% = 5000 pounds
Raw material required for Current Month Production = 20900
Purchases of raw materials for February = Raw material required for Current Month Production + Ending inventory of Raw material in February - Beginning inventory of Raw material in February
= 20900 pounds + 5000 pounds - 5225 pounds
= 20675 pounds
Get Answers For Free
Most questions answered within 1 hours.