Question

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below:

	January	February	March
Budgeted production (in units)	70,200	????	81,000
Budgeted raw materials (in pounds)	143,400	154,600	159,800

Four pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 31% of the following month's production needs. The company is expected to have 42,400 pounds of raw materials on hand on January 1.

Required:

Prepare the Budgeted production for February

Answer 1

Ans.	We assumed that the budgeted production units for the month of February are X units.
	So, the materials needed for production will be 4 X (i.e. 4 pounds * X production units).
	Budgeted ending inventory for February = Production of March * Materials required per unit * 31%
	81,000 * 4 pounds * 31%
	100440
	Budgeted beginning inventory for February = Ending inventory for January = Production of February * 4 pounds * 31%
	X * 4 pounds * 31%
	1.24 X
	Budgeted raw materials =   Total materials requirements - Budgeted beginning inventory
	154,600    =    100,440 + 4 X - 1.24 X
	154,600 - 100,440 = 4 X - 1.24 X
	54,160 = 2.76 X
	X   = 54,160 / 2.76
	19623.19	(rounded off)
	Particulars	February
	Budgeted production (units)	X
	(*) Materials requirement per unit	4
	Materials needed for production	4 X
	Add: budgeted ending inventory	100440
	Total materials requirements	100,440 + 4 X
	Less: Budgeted beginning inventory	-1.24 X
	Bugeted raw materials	154600