Question

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

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.

Homework Answers

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.

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