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- August 22, 2022 at 3:02 pm #663943
Each unit of product Zeta requires 3 kg of raw material and 4 direct labour hours. Material costs $2 per kg and
the direct labour rate is $7 per hour.
The production budget for Zeta for April to June is as follows.April May June
Production units 7,800 8,400 8,20016.17 Raw material opening inventories are budgeted as follows.
April May June
3,800 kg 4,200 kg 4,100 kgThe closing inventory budgeted for June is 3,900 kg.
Material purchases are paid for in the month following purchase. What is the figure to be included in the cash budget for June in respect of payments for purchases?
My working:
production requirement 8400X3kg = 25,200
closing inventory – 3900
less opening inventory – 4200which gives us 24,900.
But they used a different figure (4100) in closing inventory and I don’t get it why is that so… why they used 4200 instead of 3900? when this figure (closing inventory) is already given? “The closing inventory budgeted for June is 3,900 kg. “
August 22, 2022 at 4:17 pm #663949Given that the cash paid in June is for May purchases, it is the opening and closing inventory for May that is relevant.
August 23, 2022 at 8:53 am #664006Thank you, sir.
August 23, 2022 at 11:41 am #664035You are welcome.
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