Question

Assume the sales budget for April and May is 48,000 units and 50,000 units, respectively. The production budget for the same two months is 45,000 units and 46,000 units, respectively. Each unit of finished goods required 3 pounds of raw materials. The company always maintains raw materials inventory equal to 20% of the following month's production needs. How many pounds of raw material need to be purchased in April

Answer 1

Answer:

Purchases= 135,600 pounds

Explanation:

Giving the following information:

The production budget for the same two months is 45,000 units and 46,000 units, respectively.

Each unit of finished goods required 3 pounds of raw materials.

To calculate the purchases for April, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Purchases= 45,000*3 + (46,000*3)*0.2 - (45,000*3)*0.2

Purchases= 135,000 + 27,600 - 27,000

Purchases= 135,600 pounds

Answer 2

Given the data, the number of pounds of materials to be purchased in April is 135,600 pounds.

Data and Calculations:

                                 April         May

Sales units            48,000     50,000

Production units  45,000     46,000

Number of pounds of raw materials per unit = 3

Material Requirement:

                                                     April         May

Production materials required  135,000   138,000 (46,00 x 3)

Ending inventory required         27,600               0

Total materials for production 162,600

Beginning inventory                  27,000     27,600 (138,000 x 20%)

Purchases of materials          135,600

Thus, the number of pounds of raw materials to be purchased for April production is 135,600.

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