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Budgeting
Gn John Can u pls walk me through this questionA Co. Manufactures a single product .Budgeted Production for the first 3 mths of next yr is as follows:
Mth 1 8000 units
mth 2 9000 units
mth 3 7000 units
Each unit uses 4 kg of RM costing $5. per kg.
the budgeted RM inventory at the end of each mth is to be 20% of the following months production.
What are the budgeted RM purchased for mth 2 of next yr (in $)
The opening inventory for month 2 will be 20% x 9000 x 4 = 7200 kg.
The closing inventory for month 2 will be 20% x 7000 x 4 = 5600 kg.
For production in month 2 we need 9000 x 4 = 36,000 kg
So the purchase needed in month 2 will be 36,000 + 5600 – 7200 = 34,400 kg.
Then you cost it out at $5 per kg
Thank you John.
I did it another way though-tell me it that approach is ok
80% mth2=7200
20% mth 3 =1400
8600×20=172000
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