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Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending...

Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.

Beginning Inventory Ending Inventory
Finished goods (units) 26,000 36,000
Raw material (grams) 56,000 46,000

Each unit of finished goods requires 2 grams of raw material. The company plans to sell 330,000 units during the year.

How much of the raw material should the company purchase during the year?

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Answer #1

Annual Budget

Estimated Units sold during year 330,000
Add:Desired ending inventory of finished Good 36000.
Total Production Required 366000
Less:Desired ending inventory of finished good 26000
Units to be produced during year (a) 340000
Require raw material each unit(b) 2 grams
Material units needed for production (a× b) 680000grm
Add:Desired ending inventory of raw material 46000
Total material units required 726000grm
Less:Beginning inventory of raw material 56000
Material units to be purchased 670000grm

the raw material should the company purchase during the year = 670000 Grams

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