Question

The following are budgeted data: January February March Sales in units 15,500 21,000 18,500 Production in units 18,500 19,500 17,400 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:

Answer 1

Answer: Purchases of raw materials for February would be budgeted to be 18870 Pound.

Explanation:

Given that,

Sales in January = 15,500 units

Sales in February = 21000 units

Sales in March = 18500 units

Production in units = 18,500  19,500  17,400

Material is required for each finished unit = 1 Pound

Inventory of materials at the end of each month = 30% of the following month's production needs

From the above information,

Total material required for units in February = 19500 × 1 Pound

= 19500 Pound

Desired ending inventory = 30% of 17400 = 5220

Beginning material inventory = 30% of February production units (19500)

= 5850

Purchases of raw materials for February would be budgeted = Total material required for units in February + Desired ending inventory - Beginning material inventory

= 19500 + 5220 - 5850

= 18870 Pound

Answer 2

Based on the budgeted data, the purchases of raw materials in February would be $18,870.

What amount of raw materials should be purchased in February?

First find the total material units required for January:

= Budgeted units to be produced + Desired budgeted ending inventory

= 18,500 + 5,850

= $24,350

The materials to be purchased in February would be:

= Materials required for production + Desired ending inventory - Beginning inventory

= 19,500 + 5,220 - 5,850

= $18,870

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