Cahuilla Corporation predicts the following sales in units for the coming four m

Question

Cahuilla Corporation predicts the following sales in units for the coming four months: April May June July Sales in Units 270 310 330 270 Each month's ending Finished Goods Inventory should be 30% of the next month's sales. March 31 Finished Goods inventory is 81 units. A finished unit requires 5 pounds of direct material B at a cost of $3.00 per pound. The March 31 Raw Materials Inventory has 230 pounds of B. Each 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:

Multiple Choice

316 lbs.

1,264 lbs.

1,892 lbs.

1,576 lbs.

Explanation / Answer

Budgeted purchase direct material B = Required material for production+desired ending inventory of material-beginning inventory of raw material

= (316*5)+(312*5*20%)-(316*5*20%)

Budgeted purchase of direct material B = 1576

so answer is d) 1576 lbs

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