Question

Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute budgeted purchases for raw material K for June.

880 lbs

1,200 lbs

1,220 lbs

1,240 lbs

1,212 lbs.

Answer 1

Option (E) is correct.

Step-by-step explanation:

Production require in pounds = Budgets production in June × pounds of raw material K requires

= 300 units × 4

= 1200

Total production require in pound:

= Production require in pounds + Ending inventory × pounds of raw material K requires

= 1200 + (30% × 310 units) × 4

= 1200 + 93 × 4

= 1200 + 372

= 1,572

Budgeted purchases for raw material K for June:

= Total production require in pound - Beginning balance

= 1,572 - 360

= 1,212