Question

Boben Corporation makes one product. Below is budgeted production (in units) for the third quarter of the year.

	July	August	September
Budgeted production	8,500	9,000	13,900

Each unit requires 6 pounds of raw materials, at a cost of $2.00 per pound.

Assuming Boben desires to maintain an ending raw materials inventory equal to 30% of the following month's production needs, how many pounds of raw materials does Boben need to purchase in August?

Answer 1

Answer- Boben need pound of raw materials to purchase in August = 62820 pounds.

Explanation-

Raw Material Purchase Budget
Particluars	August Month
Budgeted production in units (a)	9000
Pounds of Raw material required per unit (b)	6 pound
Raw material required for production pounds (c=a*b)	54000
Add:- Desired ending inventory	(13900 units*6 pound)*30% =25020 pounds
20% of next month production needs
Less:= Opening inventory (lbs)	(9000 units*6 pound)*30% =16200 pounds
Budgeted Raw material purchase (pounds)	62820