Question

Cahuilla Corporation predicts the following sales in units for the coming four months:

	April		May		June		July
Sales in units	240		280		300		240

Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales. March 31 Finished Goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of direct material B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted purchases of pounds of direct material B during May should be:

1,008 lbs.

1,854 lbs.

1,422 lbs.

276 lbs.

288 lbs.

Answer 1

Correct answer--------1,422 lbs.

Working

	April	May	June
Sales Units	240	280	300
Ending Inventory	112	120
Finished units needed	352	400
Less: Beginning Finished inventory	96	112
Units to be Produced	256	288

..

	April	May	June
Units to be produced	256	288	276
Raw material needed Per unit of Production	5	5	5
Raw material needed for Production requirements	1280	1440	1380
Add: Desired Ending Raw material inventory	432	414
Raw Material needed		1854
Less: Beginning inventory		432
Raw material to be purchased		1422