Question

ABC Company's budgeted production is as follows: January = 5,000 units; February = 8,000 units. Each unit produced requires 3 pounds of raw material. January beginning inventory = 3,000 pounds. Budgeted ending inventory must equal 20 percent of next month's production. Raw material purchases budgeted for January would equal _____ pounds.

Answer 1

To calculate the raw material purchases for January, determine the production needs for the month, calculate the desired ending inventory based on February's production, and account for January's beginning inventory. The result is that ABC Company should budget for 16,800 pounds of raw material purchases in January.

Step-by-step explanation:

The student is working on a budgeted production problem from managerial accounting, which requires calculation of material purchases based on the production budget and desired inventory levels. To find the budgeted raw material purchases in pounds for January, use the following steps:

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Thus, the ABC Company should budget for 16,800 pounds of raw material purchases for January.