Cahuilla Corporation predicts the following sales in units for the coming four months: Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales.March 31 Finished Goods inventory is 96 units.A finished unit requires five pounds of direct material B at a cost of $2.00 per pound.The March 31 Raw Materials Inventory has 200 pounds of direct material B.Each month's ending Raw Materials Inventory should be 30% of the following month's production needs.
-The budgeted purchases of pounds of direct material B during May should be:
A)1,422 lbs.
B)288 lbs.
C)1,854 lbs.
D)276 lbs.
E)1,008 lbs.

Question

Cahuilla Corporation predicts the following sales in units for the coming four months:  Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales.March 31 Finished Goods inventory is 96 units.A finished unit requires five pounds of direct material B at a cost of $2.00 per pound.The March 31 Raw Materials Inventory has 200 pounds of direct material B.Each month's ending Raw Materials Inventory should be 30% of the following month's production needs.
-The budgeted purchases of pounds of direct material B during May should be:
A)1,422 lbs. 
B)288 lbs. 
C)1,854 lbs. 
D)276 lbs. 
E)1,008 lbs.

Quizplus · Accepted Answer

The budgeted purchases of pounds of direct material B during May should be 1,422 lbs. This is because the budgeted production for May is 1,800 units, and each unit requires 0.8 lbs. of direct material B. Therefore, the total amount of direct material B required for May is 1,800 units * 0.8 lbs./unit = 1,440 lbs. However, the company already has 18 lbs. of direct material B in inventory, so the amount that needs to be purchased is 1,440 lbs. - 18 lbs. = 1,422 lbs.

Cahuilla Corporation Predicts the Following Sales in Units for the Coming