Question

A sporting goods manufacturer budgets production of 48,000 pairs of ski boots in the first quarter and 39,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 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 19,200 kg and the cost per kg is $9. What is the budgeted materials purchases cost for the first quarter

Answer 1

$831,600

Step-by-step explanation:

The budget must account for all of the production of the first quarter and 20% of the production of the second quarter, the number of boots considered in the budget is:

`b= 48,000 +0.20*39,000\\b=55,800\ boots`

Assuming that each boot uses exactly 2kg of raw material and that the company has 19,200 kg on hand, the amount of raw material still required is:

`m = 2*55,800-19,200\\m=92,400\ kg`

If the cost per kg is $9, then the budgeted materials purchases cost for the first quarter is:

`C=92,400*\$9\\C=\$831,600`

The budgeted materials purchases cost is $831,600.