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Materials (budgeted purchase quantity)

Forums › FIA Forums › MA1 Management Information Forums › Materials (budgeted purchase quantity)

  • This topic has 4 replies, 4 voices, and was last updated 4 months ago by Taqiullah.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • September 14, 2019 at 5:49 pm #546162
    syedfahad98
    • Topics: 1
    • Replies: 0
    • ☆

    A manufacturer holds inventory of a raw material item. The manufacturer makes and sells a single product, and each unit of product uses 2.5 kgs of the raw material. The budgeted production for the year is 6,000 units of the product. At the start of the year, the manufacturer expects to have 1800 units of the raw material item in inventory, but plans to reduce inventory levels by one-third by the end of the year.
    What will be the budgeted purchase quantities of the raw material item in the year?

    A) 13,800kg
    B) 14,400kg
    C) 15,000kg
    D) 15,600kg

    Kindly explain how to solve this I’m completely lost here
    Thank you

    September 15, 2019 at 9:32 am #546184
    Ken Garrett
    Keymaster
    • Topics: 9
    • Replies: 8931
    • ☆☆☆☆☆

    Number of units sold = opening units + purchased units – closing units.

    So, for example, if you started with 100 kg and ended with 120 kg, having bought 300 kg, you must have sold 280 units. Think of the 300 units bought being split between 20 needed to increase inventory and the rest sold.

    Kg sold = 6000 x 2.5 = 15,000
    Opening inventory = 1800 kg so closing inventory = 1800 x 2/3 = 1200

    Therefore:

    15,000 = 1800 + Purchased – 1200 = 600 + purchased

    So purchased must be 15,000 – 600 = 14,400

    February 25, 2020 at 7:39 pm #563139
    Mishi12345.
    • Topics: 0
    • Replies: 1
    • ☆

    Plz Explain Material Purchase Cycle…??

    February 25, 2020 at 10:39 pm #563150
    Ken Garrett
    Keymaster
    • Topics: 9
    • Replies: 8931
    • ☆☆☆☆☆

    Try chapters 3 and 7 of our notes.

    September 17, 2020 at 6:21 pm #585960
    Taqiullah
    • Topics: 1
    • Replies: 1
    • ☆

    Thanks

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Viewing 5 posts - 1 through 5 (of 5 total)
  • The topic ‘Materials (budgeted purchase quantity)’ is closed to new replies.

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