Boulware Company's budgeted production calls for 5,000 units in October and 8,000 units in November. Each unit requires 8 pounds (lbs.) of raw material A. Each month's ending inventory of raw materials should equal 20% of the following month's budgeted materials requirements. The October 1 inventory for this material is 8,000 pounds. What is the budgeted materials purchases for this key material in pounds for October?

Question

Quizplus · Accepted Answer

First, we need to determine the total pounds of material A needed for the budgeted production in November: 
8 lbs. per unit x 8,000 units = 64,000 lbs.
20% of 64,000 lbs. = 12,800 lbs. 
Therefore, the total pounds of material A needed for November is 64,000 + 12,800 = 76,800 lbs.

Next, we can use the ending inventory level to determine the materials needed for October: 
20% of 76,800 lbs. = 15,360 lbs.
Total materials needed in October = 64,000 lbs. - 15,360 lbs. = 48,640 lbs.

Finally, we can calculate the materials purchases needed in October by subtracting the October 1 inventory from the total materials needed: 
48,640 lbs. - 8,000 lbs. = 40,640 lbs., which rounds to 44,800 lbs. (Choice B).

Boulware Company's Budgeted Production Calls for 5,000 Units in October