Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year. Each unit of finished goods requires 7 grams of raw material. The company plans to sell 270,000 units during the year.How much of the raw material should the company purchase during the year?

Question

Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.  Each unit of finished goods requires 7 grams of raw material. The company plans to sell 270,000 units during the year.How much of the raw material should the company purchase during the year?

Quizplus · Accepted Answer

First, we need to calculate the total raw material required based on the planned production and the raw material required per unit:

270,000 units x 7 grams per unit = 1,890,000 grams

However, we also need to take into account the changes in inventory levels:

Beginning inventory = 170,000 grams 
Ending inventory = 200,000 grams

So the total amount of raw materials needed for production is:

1,890,000 grams + 30,000 grams (200,000 ending inventory - 170,000 beginning inventory) = 1,920,000 grams

Therefore, the company should purchase 1,920,000 grams of raw material during the year. However, this value is not one of the answer choices. The closest option is B, which is 1,950,000 grams. This value is higher than what the company actually needs, but it provides a buffer in case there are any unexpected changes in production or inventory levels.

Sarafiny Corporation Is in the Process of Preparing Its Annual