The following are budgeted data: January February March Sales in units 15,000 20

Question

The following are budgeted data:

January

February

March

Sales in units

15,000

20,000

18,000

Production in units

18,000

19,000

16,000

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

A) 19,600 pounds

B) 20,400 pounds

C) 18,400 pounds

D) 18,600 pounds

January

February

March

Sales in units

15,000

20,000

18,000

Production in units

18,000

19,000

16,000

Explanation / Answer

C) 18,400 pounds

Working:

January February March Production in units         18,000      19,000      16,000 Material required for each production unit(in pound) 1 1 1 Total Materials required for production 18,000      19,000      16,000 Add:Ending Inventory of materials           3,800         3,200 Less:Beginning inventory of Materials           3,600         3,800         3,200 Purchase of Raw Materials         18,200      18,400      12,800 Working: December January February Next Month production needs a         18,000      19,000      16,000 Ending Inventory Materials @ 20% b=a*20%           3,600         3,800         3,200

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