A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year.Each pair of boots require 2 kg of a key raw material.The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs.Beginning inventory for this material is 18,000 kg and the cost per kg is $8.What is the budgeted materials purchases cost for the first quarter?

Question

Quizplus · Accepted Answer

First, we need to calculate the material needed for production in each quarter:

1st quarter: 45,000 pairs x 2 kg/pair = 90,000 kg
2nd quarter: 30,000 pairs x 2 kg/pair = 60,000 kg

Next, we need to calculate the ending inventory for each quarter:

1st quarter ending inventory: 20% of 60,000 kg = 12,000 kg
2nd quarter ending inventory: 20% of 90,000 kg = 18,000 kg

Now, we can calculate the total material needed for the first quarter:

Total material needed = 90,000 kg + 12,000 kg - 18,000 kg (beginning inventory) = 84,000 kg

Finally, we can calculate the budgeted materials purchases cost for the first quarter:

Budgeted cost = total material needed x cost per kg = 84,000 kg x $8/kg = $672,000

Therefore, the correct answer is B) $672,000.

A Sporting Goods Manufacturer Budgets Production of 45,000 Pairs of Ski