A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in

Question

A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?

A. 720,000

B. 672,000

C. 576,000

D. 729,600

E. 864,000

Explanation / Answer

Q1 Q2 Budgeted Production 45000 30000 Raw Material required 90000 60000 Less Beginning Inventory 18000 12000 Add Ending Inventory 20% of Next Quarter 12000 Result Purchase of Raw Material 84000 48000 Cost per Unit of Raw Material 8 8 Result Budgeted Material Purchases 672000 Answer is B 672000

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