Question

A sporting goods manufacturer budgets production of 59,000 pairs of ski boots in the first quarter and 50,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 23,600 kg and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?

Answer 1

Purchases= 114,400 kg

Total purchase cost= $915,200

Step-by-step explanation:

Giving the following information:

Beginning inventory= 23,600 kg

Cost per kg= $8

Production= 59,000 pairs

Desired ending inventory= (50,000*0.2)*2= 20,000 kg

To calculate the purchases, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Purchases= 59,000*2 + 20,000 - 23,600

Purchases= 114,400 kg

Total purchase cost= 114,400*8= $915,200