Question

14 Kyoto, Inc. predicts the following sales in units for the coming four months:

April May June July

Sales in units.......... 240 280 300 240

Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires four pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs. The budgeted purchases of pounds of raw material B during May should be:

A. 283 lb. B. 1134.4 lb C. 1,418 lb D. 1,460 lb E. 1,502 lb

Answer 1

Schedule of Production For the month of May
Particulars	May
Budgeted sales unit	280
Add: Desired ending inventory (300*60%)	180
Total	460
Less: Beginning inventory (280*60%)	168
Production during May (units)	292

Schedule of budgeted purchases of raw materials For the month of May
Particulars	May
Raw material required for Budgeted production(292*4 pounds)	1,168
Add: Desired ending inventory [(300+240*60%-180)*4*30%]	316.80
Total	1,484.80
Less: Beginning inventory (1168*30%)	(350.40)
Budgeted purchase (lb)	1,134.40

Option B. is correct answer.