Question

) Prestwich Company has budgeted production for next year as follows: First Quarter Second Quarter Third Quarter Fourth Quarter Production in units 60,000 80,000 90,000 70,000 Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to start the year. The cost of material A is $3 per pound. Prestwich pays for 60% of the purchases in the month of purchase and 40% in the following month. a. What would be the budgeted purchases of material A in pounds for the second quarter

Answer 1

165,000 pounds ($495,000)

Step-by-step explanation:

To determine the budgeted purchases of material A in pounds for the second quarter, prepare a Materials Purchases Budget as follows :

Materials Purchases Budget

Pounds

Materials Required for Production (80,000 x 2) 160,000

Add Closing Materials Inventory (90,000 x 2 x 25%) 45,000

Total Materials 205,000

Less Opening Materials Inventory (80,000 x 2 x 25%) (40,000)

Material Purchases 165,000

Cost per unit $3

Budgeted Materials Cost $495,000