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Hie john question, j co makes a component m which uses 3kgs of raw material x.the opening inventory at the start of next year is expected to be as follows: opening inventory of raw material x 5000kgs @ 4, opening inventory of component m 3000 units . Budgeted sales of component m are expected to be 48000 units occuring evenly throughout the year .closing inventory of raw material x : one month worth of production. Closing inventory of component m : two month worth of sales . 1 What is the material x purchase budget budget in dollars?2 What is the material x purchases budget for the year?
You know the opening inventory is 3,000 units.
The sales are 48,000 units
The closing inventory is 2 months x 48,000/12 = 8,000 units.So you can calculate the production over the year (53,000 units).
Therefore the material usage is 53,000 x 3kg = 159,000 kg.
You know the opening and closing inventory of materials, therefore you can calculate how many kg’s they need to purchase. (For the $ amount you simply multiply by $4).
Does the book where you found the question not also have an answer? It would be better for you to ask which part of the answer causes you problems rather than just ask me to provide an answer.
Thanks john maybe my question was a little bit not clear l understand that production was 53000 units and that material usage we multiply by 3 to get 159000kgs bt now my problem is to get material puchase budget they are saying material x purchase budget 96000 divided by 12 add 159000 subtract 5000 equals 162000kgs then multiply by 4 now ‘m wondering wher is 96000 and 12 coming from for more enquery l got this question from practice revision kit for exams from february 2014 page 199 question number 30,1 please have a look thank you
You do not say which revision kit you are using!!!
However, I am guessing it is BPP. I do not have the BPP Revision Kit however several people have previously commented about this and the fact that it is a mistake.
The opening inventory is 5,000 kg. The closing inventory should be 48,000 x 3kg dividend by 12 (for 1 month). They have used 2 kg per unit by mistake.Hey john once again you said they made a mistake it was suppose to be 48000 multiplied by 3kgs bt why because 48000 represent bugeted sales yet the production is 159000kgs so tht we divide by 12 and get 1 month ofworth of production pls help me too much of confusion is running cause my question is why do we have to use budgeted sales figure instead of one mnth worth of production
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