Reaser Corporation makes one product. Each unit of finished goods requires 4 pounds of raw materials. The ending finished goods inventory equals 10% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. If 50,600 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

Question

Reaser Corporation makes one product.  Each unit of finished goods requires 4 pounds of raw materials. The ending finished goods inventory equals 10% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. If 50,600 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

Quizplus · Accepted Answer

The budgeted required production for May is computed as follows:
 11eacbfc_c5d3_cab7_8ffe_bfbf359acc9a_TB7552_00 *June sales of 12,600 units × 10% = 1,260 units
** May sales of 8,700 units × 10% = 870 units
The budgeted raw material purchases for May are computed as follows:
 11eacbfc_c5d3_cab8_8ffe_27369a8ae498_TB7552_00 * 50,600 pounds × 40% = 20,240 pounds.
** 36,360 pounds × 40% = 14,544 pounds.

Reaser Corporation Makes One Product