Question

16.

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below:

	January	February	March
Budgeted production (in units)	66,000	?	80,000
Budgeted raw materials purchases (in pounds)	145,200	171,200	227,200

Two pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 28,000 pounds of raw materials on hand on January 1. Budgeted production for February should be:

rev: 10_27_2016_QC_CS-67319

123,200 units

48,000 units

88,000 units

96,000 units

Answer 1

1	February
Required production in units	A
Raw materials required per unit	2
Raw materials needed to meet the production	2A
Add desired ending raw materials inventory (80,000 units × 2 pounds per unit × 30%)	48000
Total raw materials needs	48,000 + 2A
Less beginning raw materials inventory (A units × 2 pounds per unit × 30%)	0.6A
Raw materials to be purchased	171,200
171,200 = 48000+2A - 0.6A
1.4A = 123200
A = 88000
Ans: C 88000