Question

A sporting goods manufacturer budgets production of 58,000 pairs of ski boots in the first quarter and 49,000 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 30% of the following quarter's material needs. Beginning inventory for this material is 34,800 kg and the cost per kg is $7. What is the budgeted materials purchases cost for the first quarter?

Multiple Choice

$774,200.

$812,000.

$568,400.

$1,055,600.

$849,800.

Answer 1

Budgeted production in 1st quarter	58,000
Raw material required per unit	2 Kg
Total raw material required for production (58,000*2)	116,000
Add: Beginning raw material inventory	34,800
Less: Ending raw material inventory (49,000*2*30%)	29,400
Raw material to be purchased	121,400
Cost per kg of raw material	$ 7
Budgeted material purchase cost for first quarter (121,400*$7)	$ 849,800

Answer is E. $849,800

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