Question

The Bridget Company has budgeted sales for 100,000 units of its product for next year. Assume...

The Bridget Company has budgeted sales for 100,000 units of its product for next year.

Assume Bridget begins the year with 40,000 units of finished product, but budgets ending inventory to be only 10,000 finished units.

a. Compute the total budgeted units of production required for next year.

b. If each unit takes three pounds of raw materials to make, and we now have 5,000 pounds of raw material on hand but want to end with 8,000 pounds, how many pounds of raw material do we need to purchase next year?

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Answer #1

a.

Sales = 100,000

Budgeted beginning inventory = 40,000

Budgeted ending inventory = 10,000

Total budgeted units of production required for next year = Sales + Budgeted ending inventory - Budgeted beginning inventory

= 100,000 + 10,000 - 40,000

= 70,000

b.

Pounds of raw material per unit = 3

Beginning raw material = 5,000 pounds

Ending raw material = 8,000 pounds

Pounds of raw material we need to purchase next year = Raw material required for production + Ending raw material - Beginning raw material

= (70,000*3) + 8,000 - 5,000

= 213,000

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