ABC Company’s budgeted sales for June, July, and August are 12,000, 16,000, and
ID: 2597316 • Letter: A
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 month’s budgeted production as raw material inventory each month. Calculate the number of pounds of raw material to be purchased in June
Explanation / Answer
June July Budgeted Sales (units) 12,000 16,000 Add: Ending inventory 4,800 4,200 Less: Opening inventory 3,600 4,800 Budgeted production 13,200 15,400 Raw material required per unit (pound) 3 3 Total raw material required 39,600 46,200 Add: Ending raw material (46,200 x 25%) 11,550 Raw material to be purchased 51,150