The Tobler Company has budgeted production for next year as follows: $$\begin{array} { | c | l | l | l | l | }
\hline \text { Quarter } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \
\hline \text { Production in units } & 10,000 & 12,000 & 16,000 & 14,000 \
\hline
\end{array}$$ Four kilograms of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 kilograms. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in kilograms in the third quarter will be?

Question

The Tobler Company has budgeted production for next year as follows: $$\begin{array} { | c | l | l | l | l | } 
\hline \text { Quarter } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \
\hline \text { Production in units } & 10,000 & 12,000 & 16,000 & 14,000 \
\hline
\end{array}$$ Four kilograms of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 kilograms. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in kilograms in the third quarter will be?

Quizplus · Accepted Answer

For the third quarter, the production requirement is 16,000 units. Each unit requires 4 kilograms of raw materials, so the total raw materials needed for production is $16,000 \times 4 = 64,000$ kilograms. The desired ending inventory for the third quarter is 10% of the next quarter's (fourth quarter) production needs, which is $14,000 \times 4 = 56,000$ kilograms of raw materials needed for the fourth quarter production. 10% of this is $56,000 \times 0.10 = 5,600$ kilograms. Therefore, the total raw materials needed for the third quarter is the sum of the production needs and the desired ending inventory, which is $64,000 + 5,600 = 69,600$ kilograms. The beginning inventory for the third quarter is 10% of the third quarter's production needs, which is $16,000 \times 4 = 64,000$ kilograms, and 10% of this is $64,000 \times 0.10 = 6,400$ kilograms. Thus, the budgeted purchases of raw materials for the third quarter is the total needed minus the beginning inventory, which is $69,600 - 6,400 = 63,200$ kilograms.

The Tobler Company Has Budgeted Production for Next Year as Follows