Question

The following are budgeted data:

January February March
Sales in units 15,200 20,400 18,200
Production in units 18,200 19,200 17,100

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 30% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:
Multiple Choice
a. 18,630 pounds
b. 19,830 pounds
c. 19,670 pounds
d. 18,570 pounds

Answer 1

d. 18,570 pounds

Step-by-step explanation:

The computation of the raw material purchased for the month of February is shown below:

= Production in units + ending inventory - beginning inventory

where,

Production in units = 19,200

Ending inventory is

= 17,100 × 30% × 1

= 5,130

And, the beginning inventory is

= 19,200 × 30% × 1

= 5,760

So, the raw material purchased for the month of February is

= 19,200 + 5,130 - 5,760

= 18,570 pounds

We simply applied the above formulas