Cohuilla Corporation predicts the following soles in units for the coming four m
ID: 2437672 • Letter: C
Question
Cohuilla Corporation predicts the following soles in units for the coming four months: April May June July ales in Units 398 30 458 390 Each month's ending Finished Goods n entory should be 30% of the next month's soles. Morch JIF nished Goo05 nventory s 117 units. A finished unit equires 5 pounds of direct m ten 1 ot a cost of $3.00 per pound. The March 31 Raw Moter ols Inventory has 240 pounds of B. Eoch month's ending Raw Materials Inventory should be 20% of the following month's production needs. The budgeted purchases of pounds of direct material B during May should be: Muluple Choice 436 Ibs. 2612 lbs. 432 s.Explanation / Answer
Step 1
Calculation of estimated production of finished goods during May:
129
[430 x 30%]
135
[450 x 30%]
117
[390 x 30%]
(129)
[Closing stock of previous month]
(135)
[Closing stock of previous month]
Step 2: Calculation of budgeted raw material purchases during May
2,010
[402 x 5 pounds]
2,180
[436 x 5 pounds]
2,160
[432 x 5 pounds]
436
[2,180 x 20%]
432
[2,160 x 20%]
(436)
[Closing stock of previous month]
Therefore, budgeted raw material purchases during May = 2,176 lbs.
April May June July Estimated sales (In Units) 390 430 450 390 Closing stock @30 % of next month's estimated sales [To maintain]129
[430 x 30%]
135
[450 x 30%]
117
[390 x 30%]
Total number of finished goods units required 519 565 567 LESS: Finished goods units already available as opening stock 9117)(129)
[Closing stock of previous month]
(135)
[Closing stock of previous month]
Units need to be produced (In units) 402 436 432