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The single product manufactured by Allegrop Co requires 2.5 kg of a single raw material per unit of product. The material costs $9.00 per kg.
Budgets are being prepared and the following additional information is available:Budgeted sales for the next three periods are:
Period 1 38,600units
Period 2 26,500units
Period 3 32,100 units*Opening inventory of finished goods in each period is budgeted to be 25% of the budgeted sales demand in that period.*
*Opening inventory of raw material in each period is budgeted to be one third of the budgeted material usage in that period.*what is the budgeted inventory of finished goods in period 1: my answer: 38600*25%= 9650. 38600- 9650= 28950.
what is the budgeted production volume in period 2: 26500*25%= 6625. 32100-26500= 5600. 26500-6625+5600= 25475im not sure if this is correct. im really confused esp the budgeted inventory.. kindly help me with this sir.
No.
If the opening inventory is 25% of the sales, then for period 1 the sales are 38,600 x 25% = 9,650 and this is the opening inventory. I really don’t know why you are subtracting.
The opening inventory for period 2 is 25% x 26500 = 6625. The closing inventory is the same as the opening inventory for period 3 which is 25% x 32,100 = 8025
Therefore the production is 26500 – 6625 + 8025 = 27900
(I am puzzled why you do not know the answer from your book. You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations for all the questions.)
sorry sir but this questions are from my module.. and also.. what if the budgeted production in period 3 is 31,600 units and in period 4 is 28,900 units.. and the questions are:
what are the budgeted purchases of the raw mat. in period 3? my answer is 66,300.. bc its says that the company requires 2.5kg of a single raw material per unit. the material cost $9 per kg. so 31600*2.5= 79000 and then i add the closing inv and deduct opening inv which is = 79000-19750+7050 = 66,300
what is the budgeted cost of the raw material usage in period 4? my answer is 72,250 because 28900*2.5
are these correct? if not pls correct me sir
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