Question

Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted production for May is:

Answer 1

$2,844

Explanation:

we know that Budgeted Production i = Estimated Sales + Closing Inventory - Opening Inventory

so budgeted production of may

= may sales + 40% of June Sales - 40% of May Sales)

=280+ ( 300*40%) - (280*40%)

=288 units

Budgeted Purchase in kg for May = Required for May's Prod + (30% Required for June Prod) - ( 30% of May Prod)

= 288*5 + ( 276*5*30%) - (288*5*30%) ( June production= 300+ 240*40% - 300*40%) = 276

=1.422 kg

Budgeted Cost for Purchase of Raw Material = 1422* 2 = $2,844