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3 March, 21:41

Saphire Company budgeted the following production in units for the second quarter of the year:

April 45,000

May 38,000

June 42,000

Each unit requires one pound of raw material. Saphire's policy is to have 30% of the following month's production needs for materials in inventory.

A) Raw materials purchases budgeted for May in pounds equal:

a) 39,200

b) 45,600

c) 50,600

d) 42,900

B) Desired beginning inventory for June in pounds equals:

a) 9,575

b) 12,600

c) 10,500

d) 11,400

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Answers (1)
  1. 3 March, 23:54
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    Instructions are below.

    Explanation:

    Giving the following information:

    Sales:

    April 45,000

    May 38,000

    June 42,000

    Each unit requires one pound of raw material. Saphire's policy is to have 30% of the following month's production needs for materials in inventory.

    A) Budgeted production = sales + desired ending inventory - beginning inventory

    Budgeted production:

    Sales=38,000

    Ending inventory = 42,000*0.3 = 12,600

    Beginning inventory = 38,000*0.3 = (11,400)

    Total = 39,200

    B) Desired beginning inventory = budgeted sales*30%

    Beginning inventory = 42,000*0.3 = 12,600
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