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 :)
Ask the Tutor ACCA MA
budget raw material purchases
11y ago#1Opening 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)
Dear Sir,
But this answer is $172,000. please advise.
Thanks
11y ago#3Sorry - 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
Sign in to reply to this topic.