Question

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

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

Homework Answers

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.

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