Question

The following are budgeted data:

January			February		March
Sales in units	15,200			20,400		18,200
Production in units	18,200			19,200		17,100

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 30% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

Multiple Choice

18,630 pounds

19,830 pounds

19,670 pounds

18,570 pounds

Answer 1

GIVEN DATA :

Budgeted data:  

PARTICULARS JANUARY FEBRUARY MARCH

Sales in units = 15,200 20,400 18,200

Production = 18,200 19,200 17,100

The inventory of material at the end of the month equal =30% of the following months production needs.

REQUIRED:

Purchases of raw materials for February would be budgeted to be?

SOLUTION:

Raw material needed for february production = 19,200 * 1  

= 19,200 Pounds

Raw material inventory at the end of february = 17,100 * 30%

= 17,100 * 30/100

= 5,130 Pounds

Raw material inventory at rhe beginning of february =19,200 * 30%

= 19,200 * 30/100

= 5,760 Pound

PURCHASE OF RAW MATERIAL FOR FEBRUARY = Raw material needed for february + Ending inventory - Beginning inventory

Purchase of raw material for february = 19,200 + 5,130 - 5,760

= 24,330 - 5,760

= 18,570 Pounds

Therefore purchase of raw material for february is 18,570 pounds

HENCE OPTION "D (18,570 Pounds)" IS CORRECT ANSWER