Scooter Corp. has forecast sales as follows: July, 30,000 units; August, 35,000

Question

Scooter Corp. has forecast sales as follows: July, 30,000 units; August, 35,000 units; and September, 40,000 units. Finished goods inventory as of July 1 is forecast to be 10,000 units. Finished goods inventory of 20% of the following month’s sales needs is desired. Each finished unit requires 5 pounds of raw material. The raw materials inventory level on July 1 was 202,500 pounds and the expected raw materials inventory level on July 31 will be 270,000 pounds. How many pounds of raw material should be purchased in July?

a. 27,000 pounds

b. 40,500 pounds

c. 135,000 pounds

d. 202,500 pounds

Explanation / Answer

production budget july august expected sale unit 30,000 35,000 Add:ending inventory 7000 8000 total needs 37,000 43,000 less:opening inventory -10,000 -7000 purchase required 27,000 36,000 Direct materials budget july august purchase required 27,000 36,000 units required per pound 5 5 total pounds 135000 180000 Add:Finished goods inventory 270,000 total needs 405000 less beginning inventory -202,500 materials purchased 202500 answer option d   202,500

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