Question

A sporting goods manufacturer budgets production of 53,000 pairs of ski boots in the first quarter and 44,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 25% of the following quarter’s material needs. Beginning inventory for this material is 26,500 kg and the cost per kg is $7. What is the budgeted materials need in kg. in the first quarter?

Multiple Choice

• 106,000 kg.

• 101,500 kg.

• 132,500 kg.

• 128,000 kg.

• 154,500 kg.

Answer 1

Working as follows:

Consumption of material in first quarter
=	Production required	×	Raw material required per unit
=	53,000	×	2kg
=	106,000 kg

Similarly, consumption of material in second quarter:

= 44,000 kg   2 kg

= 88,000 kg

Budgeted ending inventory for first quarter:

= 25% of consumption requirements of second quarter

= 25% of 88,000 kg

= 22,000

Beginning inventory of first quarter is given as 26,500 kg

Now,

Consumption = Openning inventory + Purchase - Closing Inventory

106,000 kg = 26,500 + Purchase - 22,000

Purchase = 101,500 kg