Question

Keener Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2020 through June 30, 2021.

	July 1 2020	June 30 2021
Raw material	40,000	10,000
Work-in process	8,000	8,000
finished goods	30,000	5,000

Three (3) units of raw material are needed to produce each unit of finished product.
If 450,000 finished units were to be manufactured during the 2020-2021 fiscal year by Keener Company, the units of raw material needed to be purchased would be

		1,350,000 units.
		1,360,000 units.
		1,320,000 units.
		1,330,000 units.

Answer 1

Working Notes:
	Calculation of number of pounds required for production
	Budgeted Production	450,000
	"X" By : Quantity of direct material per unit	3	Units
	No. of Units of Direct material is required	1,350,000	Units
Solution:
	Direct Materials Purchases Budget
	No. of Units of Direct material is required	1,350,000
	Add: Ending Inventory	10,000	Units
	Total Units	1,360,000	Units
	Less : Beginning Balance of inventory	40,000	Units
	Total Pounds to be purchased	1,320,000	Units
Answer = Option 3 = 1,320,000 Units