Samson Company has budgeted production for the next two months as follows: $$\begin{array} { l l }
\text { July } & 16,000 \text { units } \
\text { August } & 22,000 \text { units }
\end{array}$$ Each unit requires 5 pounds of material. Raw materials at the end of each month should equal 10% of the next month's production requirements. How many pounds will be budgeted for purchases of raw materials for July?

Question

Samson Company has budgeted production for the next two months as follows: $$\begin{array} { l l } 
\text { July } & 16,000 \text { units } \
\text { August } & 22,000 \text { units }
\end{array}$$ Each unit requires 5 pounds of material. Raw materials at the end of each month should equal 10% of the next month's production requirements. How many pounds will be budgeted for purchases of raw materials for July?

Quizplus · Accepted Answer

Samson Company requires 5 pounds of material for each unit. In July, the company will produce 16,000 units, so it will need 80,000 pounds of material (16,000 units x 5 pounds per unit). The company also wants to have 10% of the next month's production requirements on hand at the end of each month. In August, the company will produce 22,000 units, so it will need 110,000 pounds of material (22,000 units x 5 pounds per unit). Therefore, the company will need to purchase 83,000 pounds of material in July (80,000 pounds for July production + 3,000 pounds for August ending inventory).

Samson Company Has Budgeted Production for the Next Two Months July 16,000 units August 22,000 units \begin{array} { l l } \text { July } & 16,000 \text { units } \\\text { August } & 22,000 \text { units }\end{array} July August ​16,000 units 22,000 units ​

Samson Company Has Budgeted Production for the Next Two Months $\begin{array} { l l } \text { July } & 16,000 \text { units } \\\text { August } & 22,000 \text { units }\end{array}$