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Each unit of product Z requires 3 kg of raw material, material costs $2 per kg.
The production budget for Z for april to june is as follows:
Production units April May June
7800 8400 8200
Raw material opening inventories are budgeted as follows:
April May June
3800kg 4200kg 4100 kgThe closing inventory budgeted for June is 3900 kg.
Material purchases are paid for in the month following purchase. What figure is to be included in the cash budget for June for purchases?I dont understand why in the answer closing inventory is 4100 kg and opening inventory is 4200 kg. Can you pls explain it to me Sir.
Thanks in advance
Because purchases are paid for the month after purchase, the payment in June will be for the May purchases.
The question tells you that the opening inventory in May is 4,200 kg.
The closing inventory in May will be the same as the opening inventory for June, which is given in the question as 4,100 kg.
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