Question

Sartain 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)	28,000	78,000
Raw material (grams)	58,000	48,000

  

Each unit of finished goods requires 3 grams of raw material.

  

If the company plans to sell 630,000 units during the year, how much of the raw material should the company purchase during the year?

2,088,000 grams

2,058,000 grams

2,040,000 grams

2,030,000 grams

Answer 1

Begining balance of Finished goods = 28,000

Ending balance = 78,000

Sale = 630,000

Total Production during year = 630,000 + 78,000 - 28,000

= 680,000

Total production during year is 680,000 unit.

Total raw material required = 680,000 × 3

= 2,040,000 gram.

Total Raw material required during year is 2,040,000.

Raw material need to purchase = Raw material use + Ending balance - begining balance

= $2,040,000 + 48,000 - 58,000

= 2,030,000 gram.

Raw material need to purchase is 2,030,000.

Option (D) is correct answer.