Question

14 Kyoto, Inc. predicts the following sales in units for the coming four months:
                    April       May      June    July

Sales in units..........       240        280       300     240

Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires four pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs. The budgeted purchases of pounds of raw material B during May should be:
A. 283 lb.       B. 1134.4 lb     C. 1,418 lb       D. 1,460 lb     E. 1,502 lb

Answer 1

Solution:

Production budget - Kyoto Inc.
Particulars	May	June
Budgeted sales units	280	300
Add: Desired ending inventory (60% of following month sale)	180	144
Less: Beginning inventory	168	180
Budgeted Production	292	264

Material Purchase budget for July - Kyoto Inc.
Particulars	Amount
Production units	292
Material required per unit (In Pound)	4
Total material required for july	1168
Add: Desired ending inventory (264*4*30%)	316.8
Less: Beginning inventory	350.4
Raw Material to be purchased (In Pound)	1134.4

Hence option B is correct.