Question

Assume the sales budget for April and May is 37,000 units and 39,000 units, respectively. The...

Assume the sales budget for April and May is 37,000 units and 39,000 units, respectively. The production budget for the same two months is 34,000 units and 35,000 units, respectively. Each unit of finished goods required 5 pounds of raw materials. The company always maintains raw materials inventory equal to 25% of the following month's production needs. How many pounds of raw material need to be purchased in April?

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Answer #1

Pounds to be purchased in april= 171,250 pounds

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April May
Budgeted Production (unis) 34000 35000
Units of Raw material neede per unit of finoisged goods 5 5
Units of raw material needed to meet production 170000 175000
Budgeted Ending Inventory (pounds) 43750
Total Units of raw material needed (pounds) 213750
Beginning Inventory  (pounds) 42500*
Units of raw material to be purchased (pounds) 171250

*Beginning inventory is 25% of raw material need of april because that would have been ending inventory of March.

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