Question

The following are budgeted data:

January February March
Sales in units 16,600 23,200 19,600
Production in units 19,600 20,600 19,300
One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 25% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

Garrison 16e Rechecks 2017-10-03

Multiple Choice

A.20,925 pounds
B.20,575 pounds
C.20,275 pounds
D.18,325 pounds

Answer 1

Purchases of raw materials for February would be budgeted to be C.20,275 pounds

Step-by-step explanation:

One pound of material is required for each finished unit.

The inventory of materials at the end of February = 25% x 19,300 = 4,825 pounds

The inventory of materials at the end of January = 25% x 20,600 = 5,150 pounds

The materials used to produce finished unit in February = 20,600 pounds.

Purchases of raw materials for February = The materials used to produce finished unit in February + The inventory of materials at the end of February - The inventory of materials at the end of January = 20,600 + 4,825 - 5,150 = 20,275 pounds