ABC Company’s budgeted sales for June, July, and August are 15,400, 19,400, and
ID: 2563405 • Letter: A
Question
ABC Company’s budgeted sales for June, July, and August are 15,400, 19,400, and 17,400 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 4,620 units. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next month’s budgeted production as raw material inventory each month.
Required:
Calculate the number of pounds of raw material to be purchased in June.
Explanation / Answer
June Budgeted sales 15,400 Add: Ending inventory (15,400*30%) 4,620 Number of units required 20,020 Less: Beginning inventory 4,620 Number of units to be produced 15,400 Raw material required per unit 3 Total raw material required for production 46,200 Add: ending raw material inventory (20,600*3*25%) 15,450 Raw material to be required 61,650 Less: Beginning raw material inventory ($46,200*25%) 11,550 Raw material to be purchased 50,100 July Budgeted sales 19,400 Add: Ending inventory (19,400*30%) 5,820 Number of units required 25,220 Less: Beginning inventory 4,620 Number of units to be produced 20,600