Question

The following are budgeted data: January February March Sales in units 16,900 23,800 19,900 Production in...

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:

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Answer #1

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

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