Question

The Tobler Company has budgeted production for next year as follows: Quarter First Second Third Fourth Production in Units 10,000 12,000 16,000 14,000 Four kilograms of raw materials are required for each unit produced. At the start of the year, raw materials on hand total 4,000 kilograms. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. What would be the budgeted purchases of raw materials in the third quarter

Answer 1

The correct answer is 63,200 kg.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

Raw material required for production = Production in units × req. raw material per unit

= 16,000 units × 4 kg

= 64,000 kg.

Beginning inventory = (64,000 kg) × 10%

= 6,400 kg

Ending inventory = ( 14,000 × 4 kg) × 10%

= 56,000 kg × 10%

= 5,600 kg

So, we can calculate the budgeted purchases of raw materials by using following formula:

Budgeted purchases of raw materials = Raw material required for production + Ending inventory - Beginning inventory

= 64,000 kg + 5,600 kg - 6,400 kg

= 63,200 kg