Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.

Month		Units
April		2,600
May		2,500
June		2,380

The target ending inventory of finished products is as follows.

March 31		2,030
April 30		2,290
May 31		2,140
June 30		2,380

2 units of material are required for each unit of finished product. Production for July is estimated at 2,780 units to start building inventory for the fall sales period. Rensing’s policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month’s production requirements.

Raw materials are expected to cost $5 per unit throughout the period.

Calculate the May raw materials purchases in dollars.

Raw material purchases cost

$

Answer 1

Production Budget
	May	June
Unit Sales	2500	2380
Add:Desired ending inventory	2140	2380
Total needed	4640	4760
Less:Desired bveginning inventory	-2290	-2140
Units to be produced	2350	2620
Material Purchase Budget
	May
Budgeted Production(in units)	2,350
Materials requirement per unit	2.00
Materials needed for production	4,700
Add:Budgeted ending inventory(2620*50%)	1,310
Total materials requirement	6,010
Less:Budgeted beginning inventory(2350*50%)	(1,175)
Materials to be purchased	4,835
Cost per unit	$                            5.00
Cost of Raw materials purhcased	$                        24,175