Question

Doanne Food Processing expects to have 36,000 pounds of raw materials inventory on hand on March 31, the end of the current year. The company budgets the following production (in units) for April through July, inclusive:April 120,000May 130,000June 140,000July 120,000

At the end of each month the firm desires its ending raw material inventory to be 10% of the next month's production needs. Each finished unit requires two pounds of raw materials. Doanne's budgeted purchases for raw materials (in pounds) during April should be:

Answer 1

Calculation of budgeted Purchase for raw materials during April Month

Budgeted Production 120,000 units

Raw material Production required 360,000 ( 120,000 * 360,000)

Desired inventory for next month production

39,000 pounds (10% * 130,000 * 3 pounds)

Less: beginning inventory (36,000) pounds

budgeted purchases 363,000 pounds