Speciman exam question — OpenTuition Forums

MMaria9y ago

Hi Sir, Could you please tell me how to work this out? Thanks. A company manufactures and sells one product which requires 8 kg of raw materials in its manufacture. The budgeted data relating to the next period are as follows: Units Sales 19,000 Opening inventory of finished goods 4,000 Closing inventory of finished goods 3,000 Kg Opening inventory of raw materials 50,000 Closing inventory of raw materials 53,000 What is the budgeted raw material purchases for next period?

John MoffatTutor9y ago#1

You can calculate the production by taking the sales units and adjusting by the opening and closing inventories. This gives production of 18,000 units. Since each unit needs 8kg of material, they must use 8 x 18,000 = 144,000 kg of material. To find how much material they actually purchase, you need to adjust the usage by the opening and closing inventories of material. I work through a very similar example in my free lectures on budgeting. The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.

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