Question

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

	April		May		June		July
Sales in Units	360		400		420		360

Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 Finished Goods inventory is 144 units. A finished unit requires 5 pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 210 pounds of 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:

• 2,022 lbs.
• 408 lbs.
• 2,634 lbs.
• 396 lbs.
• 1,428 lbs.

Answer 1

Solution :

Computation of Purchase of Direct material B During May
Particulars	April	May	June	July
Sales in Units	360	400	420	360
Add: Closing Finished goods inventory (40% of next month's sale)	160	168	144
Less : Opening Finished Good Inventory	144	160	168
Total Finished Goods Production needs	376	408	396
Direct Material required per unit (Pounds)	5	5	5
Total Material needs Required for production (Pounds)	1880	2040	1980
Add: Closing Raw Material Inventory (30% of next months needs of material)	612	594
Less: Opening Raw material Inventory	210	612
Purchase of Direct Material during May (Pounds)		2022

Hence, 2,022 lbs is the correct answer.