If 66,850 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

A) 52,100 pounds
B) 72,155 pounds
C) 87,785 pounds
D) 56,525 pounds

Question

Bradley Christian · Accepted Answer

Final Answer : D, Explanation :  To determine the budgeted raw material purchases for May, we need to use the production budget and the materials required per unit of production.Let's assume that the company has a policy of maintaining ending inventory of raw materials equal to 20% of the next month's production needs. This means that the raw material purchases for May should be:May raw material purchases = May production needs + May ending inventory - April ending inventoryWe don't have information about the April ending inventory, but we can assume that it was equal to 20% of the April production needs, which was:April production needs = June production needs = 66,850 poundsApril ending inventory = 20% x 66,850 pounds = 13,370 poundsTherefore:May raw material purchases = 66,850 pounds + 20% x 66,850 pounds - 13,370 pounds= 66,850 pounds + 13,370 pounds - 13,370 pounds= 67,850 poundsThe closest option to this number is D: 56,525 pounds. The budgeted required production for May is computed as follows:   *June sales of 13,300 units × 10% = 1,330 units** May sales of 10,100 units × 10%= 1,010 unitsThe budgeted raw material purchases for May are computed as follows:   * 66,850 pounds × 30% = 20,055 pounds.** 52,100 pounds × 30% = 15,630 pounds.

If 66,850 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

A) 52,100 pounds
B) 72,155 pounds
C) 87,785 pounds
D) 56,525 pounds

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Related questions

If 66,850 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:A) 52,100 poundsB) 72,155 poundsC) 87,785 poundsD) 56,525 pounds

Definitions

Learning Objectives

Learning Objectives

Related questions

If 66,850 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

A) 52,100 pounds
B) 72,155 pounds
C) 87,785 pounds
D) 56,525 pounds