2. Resear Company sells modems. Resear desires to hold a finished goods inventor

Question

2. Resear Company sells modems. Resear desires to hold a finished goods inventory equal to 100% of the next month's sales requirement of modems. The beginning finished goods inventory is 1,200 units. Forecasted unit sales for Apri and the net three months are as follows: April May 850 June 925 July 1,000 800 The production of one finished unit requires 5 pounds of raw material. The company desires to have a one-month supply of raw materials as the ending inventory for each month. The beginning inventory of raw materials is 6,190 pounds. Prepare a direct materials purchases budget (in pounds) for April. (10 points

Explanation / Answer

SOLUTION:

Production Budget for April Particulars April May June July Sales 800 850 925 1,000 Desired finished goods ending inventory( 100% * next month’s sales) 850 925 1,000 Total Requirement 1,650 1,775 1,925 1,000 Minus: Finished goods beginning inventory 1,200 850 925 Units to be produced 450 925 1,000 Raw Materials Budget for April Particulars April May June Production requirement, 5 lbs. per finished goods unit 2,250 4,625 5,000 Desired raw materials ending inventory 4,625 Total requirement 6,875 Minus: Raw materials beginning inventory 6,190 Raw materials to be purchased 685

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