Question

A sporting goods manufacturer budgets production of 41,000 pairs of ski boots in the first quarter and 32,000 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 15% of the following quarter's material needs. Beginning inventory for this material is 12,300 kg and the cost per kg is $10. What is the budgeted materials purchases cost for the first quarter

Answer 1

Purchases= 79,300 kg

Total cost of purchase= $793,000

Step-by-step explanation:

Giving the following information:

Production:

41,000 first quarter

32,000 second quarter

Each pair of boots requires 2 kilograms.

Desired ending inventory= 15% of the following quarter's material needs.

Beginning inventory= 12,300 kg

The cost per kg is $10.

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

Purchases= production + desired ending inventory - beginning inventory

Purchases= 41,000*2 + (32,000*2)*0.15 - 12,300

Purchases= 79,300 kg

Total cost of purchase= 79,300*10

Total cost of purchase= $793,000