Question

ABC Company’s budgeted sales for June, July, and August are 15,600, 19,600, and 17,600 units, respectively....

ABC Company’s budgeted sales for June, July, and August are 15,600, 19,600, and 17,600 units, respectively. ABC requires 30% of the next month’s budgeted unit sales as finished goods inventory each month. Budgeted ending finished goods inventory for May is 4,680 units. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next month’s budgeted production as raw material inventory each month.

Required:

Calculate the number of pounds of raw material to be purchased in June.

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Answer #1
June July
Expected Unit Sales 15600 19600
Add: Desired ending Finished goods units:
19600*30% 5880
17600*30% 5280
Total Required Units 21480 24880
Less: Beginning Finished goods units 4680 5880
Required Production Units 16800 19000
June
Units to be produced 16800
Direct materials per unit(pounds) 3
Total pounds needed for production 50400
Add: Desired ending Direct materials 14250 =19000*3*25%
Total materials required 64650
Less: Budgeted Beginning materials 12600 =50400*25%
Pounds of raw material to be purchased in June 52050
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