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Material Purchases budget

Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › Material Purchases budget

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by Cath.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • January 18, 2017 at 8:47 am #368098
    jforrest19
    Member
    • Topics: 7
    • Replies: 1
    • ☆

    Hello,

    Hoping you could help me with the working for a P1 pearson mock question..

    A company has a production budget for the next 2 years of 36,000 units per annum to be produced evenly throughout both years.
    Each unit uses 2 kg of material.

    The estimated opening raw material inventory at the start of the next year is 2,000 kg but the company then wants to hold sufficient raw material inventory at the end of each month to cover the following month’s production.

    The budget material cost is $12 per kg.
    What is the material purchases budget for next year ?
    Give your answer to the nearest $000.

    Answer is 888

    However I’m getting 912

    My working was
    Required stock = 36000 units * 2kg = 72000
    + 1 month’s holding stock = 3000 * 2kg = 6000

    Less 2000kg closing stock

    = 76000kg required x £12 = 912000

    Not sure why the mock has 888000

    Many Thanks
    James

    January 20, 2017 at 9:53 pm #368636
    Cath
    Participant
    • Topics: 0
    • Replies: 446
    • ☆☆☆

    Hi, Thanks for your question.

    Im afraid it looks like the Pearson paper has an error in it -CIMA have acknowledged there were errors in the paper initially – but I was under the impression these had been removed.
    I will confirm with CIMA – but your method looks absolutely right.

    If you are getting similar questions in your exam kit correct – then please dont worry about this one – it looks like a detail must\ve been missed out somewhere.

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