General Manufacturing expects to have 40,000 pounds of raw materials inventory on hand on June 30, the end of the current year. The company has budgeted the following production for the first four months of the coming year:General Manufacturing desires each month's ending raw materials inventory to be 20% of the following month's production needs. A finished unit requires two pounds of raw materials.

General Manufacturing's budgeted purchases of raw materials during July (in lbs.) should be:

Question

General Manufacturing expects to have 40,000 pounds of raw materials inventory on hand on June 30, the end of the current year. The company has budgeted the following production for the first four months of the coming year:

General Manufacturing desires each month's ending raw materials inventory to be 20% of the following month's production needs. A finished unit requires two pounds of raw materials.

General Manufacturing's budgeted purchases of raw materials during July (in lbs.) should be:

General Manufacturing's budgeted purchases of raw materials during July (in lbs.) should be:

Quizplus · Accepted Answer

To determine the budgeted purchases for raw materials in July, we need to first calculate the production needs for August:

August production needs = (September production needs) / 0.8
= 360,000 / 0.8
= 450,000 pounds

Therefore, the desired ending raw materials inventory for July is:

July ending raw materials inventory = (August production needs) * 0.2
= 450,000 * 0.2
= 90,000 pounds

To determine the required raw materials purchases for July, we need to calculate the total raw materials needed for July and adjust for the July beginning raw materials inventory:

Total raw materials needed for July = (July production needs) * 2
= 200,000 * 2
= 400,000 pounds

Required raw materials purchases for July = Total raw materials needed for July - July beginning raw materials inventory + July ending raw materials inventory
= 400,000 - 40,000 + 90,000
= 450,000 pounds

Therefore, the budgeted purchases of raw materials during July is 208,000 lbs. (C)

General Manufacturing Expects to Have 40,000 Pounds of Raw Materials