Question

Pablo Company has budgeted production for next year as follows: Quarter First Second Third FourthProduction in units 59,000 99,000 109,000 89,000Four pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 30% of the next quarter's production needs for material A. A total of 43,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:a. 526,800 pounds.b. 408,000 pounds.c. 91,700 pounds.d. 514,800 pounds.

Answer 1

Purchases= 408,000 pounds

Step-by-step explanation:

Giving the following information:

Production:

2nd Q= 99,000 units

3rd= 109,000 units

Four pounds of material A are required for each unit produced.

Desired ending inventory= 30% of the next quarter's production

To calculate the purchases for the second quarter, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Purchases= (99,000*4) + (109,000*4)*0.3 - (99,000*4)*0.3

Purchases= 396,000 + 130,800 - 118,800

Purchases= 408,000 pounds