Question

Cahuilla Corporation predicts the following sales in units for the coming four months: April May June July Sales in Units 320 360 380 320 Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 Finished Goods inventory is 128 units. A finished unit requires 5 pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 280 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted cost of direct material B during May should be:

Answer 1

S.No	Particulars	April	May	June	July
(a)	Sales	320	360	380	320
(b)	Add: Ending Inventory	144	152	128
		(360*40%)	(380*40%)	(320*40%)
(c )	Less: Beginning Inventory	128	144	152
(d)	Production [(a) + (b) - ( c) ]	336	368	356
(e )	Number of Pounds per unit	5	5	5
(f)	Total Number of Pounds required for Production [(d) *( e)]	1680	1840	1780
(g)	Add: Ending Inventory of Raw materia	552	534
		(1840*30%)	(1780*30%)
(f)	Total [(f) + (g)]	2232	2374
(i)	Less: Opening Inventory of raw materials	280	552
(j)	Raw material to be purchased in pounds [(f) - (i)]	1952	1822
(k)	Raw material cost per pound	2	2
(l)	Budgeted cost of direct material B during May [(j)*(k)]	3904	3644

Budgeted cost of direct material B during May = $ 3644