Question

The following budgeted information is provided: Month 1 2 3 Sales in units 15,000 20,000 18,000 Production in units 16,000 22,000 15,000 One pound of materials is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. At the beginning of Month 1, there were 3,200 lbs. of materials on hand. Purchases of raw materials for Month 1 would be (in pounds):

Answer 1

Purchases= 17,200 pounds

Step-by-step explanation:

Giving the following information:

Production in units:

Month 1= 16,000 units

Month 2= 22,000 units

One pound of materials is required for each finished unit.

The inventory of materials at the end of each month should equal 20% of the following month's production needs.

Beginning inventory= 3,200 lbs.

To calculate the direct material required, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Purchases= 16,000 + 22,000*0.2 - 3,200

Purchases= 17,200 pounds