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20 May, 20:21

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 25% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:Garrison 16e Rechecks 2017-10-03A. 20,925 poundsB. 20,575 poundsC. 20,275 poundsD. 18,325 pounds

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  1. 20 May, 22:48
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    Answer: Option C = 20, 275 pounds

    Explanation:

    First, the first part of the question is missing and it as follows:

    The following are budged data

    January February March

    Sales in Units 16,600 23,200 19,600

    Production in Units 19,600 20,600 19,300

    Solution:

    The qestion is to deermine Purchases of raw materials for the month of February

    The formula is as follows:

    Production Units in February x the raw materials required per Unit in Pounds + The Closing inventory - The Opening Inventory of materials

    Using the formula we know the following

    Productoin Units in February = 20,600

    Raw Material required per Unit = 1 pound

    Closing Inventory = 25% of March (19,300) = 4,825

    Opening Inventory = 25% or February (20,600) = 5,150

    Based on the computed figures therefore,

    Production Units in February

    = 20,600 x 1 pound = 20,600 + 4,825 - 5,150 = 20,275 which is Option C
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