Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

BPP Black Friday sale!

40% discount on all BPP books specially for OpenTuition students!
Get it here >>

budget raw material purchases

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › budget raw material purchases

Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 2, 2014 at 6:03 am #180463
    superwomen
    Participant
    • Topics: 16
    • Replies: 20
    • ☆

    Hi Sir,

    Need you to help!!!

    Budgeted production for 3 mths of next year is as follow:
    month 1 : 8000 unit
    month 2 : 9000 unit
    month 3 : 7000 unit

    each unit 4kg of raw material costing $5/kg. Budgeted raw material inventory at the each mths is to be 20% of the following month’s production. What are the budgeted raw material purchases for month 2 of next year?

    Thanks 🙂

    August 2, 2014 at 7:33 am #180467
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54482
    • ☆☆☆☆☆

    Opening inventory for month 2 = 20% x 9000 x 4kg = 7200 kg
    Closing inventory for month 2 = 20% x 7000 x 4kg = 5600 kg
    Production in month 2 needs 9000 x 4kg = 26,000 kg

    So purchases in month 2 = 26000 – 7200 + 5600 = 24400 kg
    (or 24400 x $5 = $122,000)

    August 2, 2014 at 8:38 am #180478
    superwomen
    Participant
    • Topics: 16
    • Replies: 20
    • ☆

    Dear Sir,

    But this answer is $172,000. please advise.

    Thanks

    August 2, 2014 at 10:58 am #180495
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54482
    • ☆☆☆☆☆

    Sorry – if you check my workings you will see that I have made a silly arithmetic mistake.

    In the third line, production in month 2 needs 9000 x 4kg = 36,000 (I wrote 26,000 by mistake).

    Follow that through and you will that it does come to $172,000

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.