ABC Company\'s budgeted sales for June, July, and August are 12,000, 16,000, and

Question

ABC Company's budgeted sales for June, July, and August are 12,000, 16,000, and 14,000 units, respectively. ABC requires 30% of the next month's budgeted unit sales as finished goods inventory each month. Budgeted ending finished goods inventory for May is 3,600 units. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next months budgeted production as raw material inventory each month. Required Calculate the number of pounds of raw material to be purchased in June Number of pounds

Explanation / Answer

Production in june = Sales in june + Desired ending inventory-Beginning inventory

= 12000+(16000*30%)-3600

Production in june = 13200 units

Production in july = 16000+(14000*30%)-4800 = 15400 units

Raw material purchased in june = (13200*3)+(15400*3*25%)-(13200*3*25%) = 41250 pound

Number of pounds purchased = 41250 pounds

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