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10 May, 12:33

A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials need in kg. in the first quarter?

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  1. 10 May, 14:01
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    The budgeted materials need in kg. in the first quarter is 90,000 kg

    Explanation:

    For computing the budgeted material needed in the first quarter, first we have to calculate the consumption of first and second quarters separately, so that we can arrive to a solution.

    The consumption of first quarter = Budgeted production * required kg

    = 45,000 * 2

    = 90,000 kg

    The consumption of second quarter = Budgeted production * required kg

    = 30,000 * 2

    = 60,000 kg

    The ending raw material inventory = 30% of second quarter

    = 30% * 60,000

    = 18,000 kg

    Now put the formula to find out the purchase amount. The formula is shown below:

    Raw material consumption = Opening raw material inventory + purchase of raw material - ending raw material inventory

    where,

    beginning inventory = 18,000 kg

    90,000 = 18,000 + purchase - 18,000

    So, the purchase is 90,000 kg

    The question has asked the amount in kg so cost per kg is irrelevant.

    Hence, the budgeted materials need in kg. in the first quarter is 90,000 kg
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