Sill Corporation makes one product. Budgeted unit sales for January, February, March, and April are 9,900, 11,400, 11,900, and 13,400 units, respectively. The ending finished goods inventory equals 20% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. If 61,000 pounds of raw materials are required for production in March, then the budgeted raw material purchases for February is closest to:
A) 58,900 pounds
B) 104,900 pounds
C) 57,500 pounds
D) 81,900 pounds

Question

Quizplus · Accepted Answer

The budgeted raw material purchases for February is closest to 58,900 pounds.The ending finished goods inventory for February is 20% of March's sales, or 2,380 units (11,900 units * 20%). The ending raw materials inventory for February is 40% of March's raw materials production needs, or 24,400 pounds (61,000 pounds * 40%). The total raw materials needed for production in February is 57,500 pounds (9,900 units * 5 pounds + 24,400 pounds). The budgeted raw material purchases for February is 58,900 pounds (57,500 pounds + 1,400 pounds).

Sill Corporation Makes One Product