Question

Sales in Units: Month 1 = 15,000; Month 2 = 20,000; Month 3 = 18,000

Production in Units: Month 1 = 16,000; Month 2 = 22,000; Month 3 = 15,000

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. At the beginning of Month 1, 3,200 lbs. of materials were on hand. Purchases of raw materials for Month 2 would be budgeted to be
17,600 pounds
23,400 pounds
20,600 pounds
25,000 pounds

Answer 1

The correct answer is C.

Step-by-step explanation:

Giving the following information:

Sales in Units: Month 1 = 15,000; Month 2 = 20,000; Month 3 = 18,000

Production in Units: Month 1 = 16,000; Month 2 = 22,000; Month 3 = 15,000

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs.

Direct material:

Production= 22,000pounds

Ending inventory= (15,000*0.20)= 3,000 pounds

Beginning inventory= (22,000*0.10)= 4,400 pounds (-)

Total= 20,600 lbs