Question

Rensing Ltd. estimates sales for the second quarter of 2020 will be as follows. Month Units April 2,500 May 2,440 June 2,340 The target ending inventory of finished products is as follows. March 31 2,000 April 30 2,230 May 31 2,190 June 30 2,310 2 units of material are required for each unit of finished product. Production for July is estimated at 2,690 units to start building inventory for the fall sales period. Rensing’s policy is to have an inventory of raw materials at the end of each month equal to 60% of the following month’s production requirements. Raw materials are expected to cost $5 per unit throughout the period. Calculate the May raw materials purchases in dollars. Raw material purchases cost $enter the Raw material purchases cost in dollars

Answer 1

	May	June
Budgeted sales	2440	2340
Add: Desired ending inventory	2190	2310
Less: Beginning inventory	-2230	-2190
Budgeted production	2400	2460
Budgeted production for May	2400
X Raw materials per unit	2
Raw materials required for production	4800
Add: Desired ending inventory	2952	=2460*2*60%
Less: Beginning inventory	-2880	=4800*60%
Raw materials purchases	4872
X Cost per unit	5
Raw material purchases cost in dollars	24360