Question

A sporting goods manufacturer budgets production of 57,000 pairs of ski boots in the first quarter and 48,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 25% of the following quarter's material needs. Beginning inventory for this material is 28,500 kg and the cost per kg is $7. What is the budgeted materials purchases cost for the first quarter?

Multiple Choice

• $798,000.

• $766,500.

• $598,500.

• $829,500.

• $997,500.

Answer 1

	Q1	Q2
Production	57,000	48,000
Raw materials per pair (Kg)	2	2
Total raw materials needed for production (Kg)	114,000	96,000
Ending inventory of Raw materials	96,000 x 25% = 24,000
Total raw materials inventory needed	138,000
Beginning inventory of Raw materials	-28,500
Raw materials purchases (Kg)	109,500
Cost per pound	$7
Total cost of raw materials purchases	$766,500

The is the budgeted materials purchases cost for the first quarter = $766,500

Second option is correct.

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