Question
In: Accounting
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending...
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.
| Beginning Inventory | Ending Inventory | |
|---|---|---|
| Finished goods (units) | 27,000 | 77,000 |
| Raw material (grams) | 57,000 | 47,000 |
Each unit of finished goods requires 2 grams of raw material. The company plans to sell 620,000 units during the year.
How much of the raw material should the company purchase during the year?
Solutions
Expert Solution
| Answer | |||
| Raw material to be purchased = 1,330,000 grams OR 1330 kilograms (kgs) | |||
| Budgeted finished goods sale unit | 620,000 | units | |
| Budgeted finished goods ending inventory | 77,000 | units | |
| Budgeted finished goods beginning invetory | - 27,000 | units | |
| A | Budgeted finished goods production | 670,000 | units |
| B | Raw material per unit | 2 | grams |
| C= A x B | Total requirement of raw material | 1,340,000 | grams |
| D | Ending Inventory of raw material | 47,000 | grams |
| E | Beginning Inventory of raw material | - 57,000 | grams |
| F=C+D-E | Raw material to be purchased | 1,330,000 | grams |
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