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Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,600...

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,600 units, August 7,400, September 8,800, October 8,300. Each handbag requires 0.5 square meters of leather. Jared Inc.’s finished goods inventory policy is 10% of next month’s sales needs. Jared Inc.’s leather inventory policy is 35% of next month’s production needs. What will leather purchases be in August? Multiple Choice 3,789 square meters 3,712 square meters 3,982 square meters 3,687 square meters

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Answer #2

Solution:

Production budget
Particulars August September
Budgeted sales units 7400 8800
Add: Desired ending inventory (10% of following month sale) 880 830
Less: Beginning inventory 740 880
Budgeted Production 7540 8750
Material Purchase budget for August
Particulars Amount
Production units 7540
Material required per unit (In square meters) 0.5
Total material required for August 3770
Add: Desired ending inventory (8750*0.50*35%) 1531
Less: Beginning inventory 1320
Raw Material to be purchased (In square meters) 3982

Hence 3rd option is correct.

answered by: anonymous
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