Question

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 3 grams of raw material. If the company plans to sell 140,000 units during the year, how much of the raw material should the company purchase during the year?

Answer 1

Answer:

560,000 grams should be purchased

Explanation:

production budget:

estimated sales = 140,000 units

planned ending inventory = 77,000

total production required = 217,000

- beginning inventory = (27,000)

units to be produced = 190,000

materials budget:

units to be produced = 190,000

materials per unit = 3

total direct materials needed = 570,000

+ desired ending inventory = 47,000

- beginning inventory = (57,000)

direct materials purchases = 560,000