The TS Corporation has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 2,500 units.Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,200 pounds.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in material. Scheduled purchases of raw materials for the second quarter should be:
A)50,000 pounds
B)55,800 pounds
C)50,800 pounds
D)55,000 pounds

Question

The TS Corporation has budgeted sales for the year as follows:  The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 2,500 units.Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,200 pounds.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in material. Scheduled purchases of raw materials for the second quarter should be:
A)50,000 pounds 
B)55,800 pounds 
C)50,800 pounds 
D)55,000 pounds

Quizplus · Accepted Answer

To determine the scheduled purchases of raw materials for the second quarter, we need to calculate the production needs for the second quarter and add the desired ending inventory of raw materials for the second quarter.

First, we need to calculate the production needs for the second quarter. The ending inventory of finished goods for the second quarter should be 25% of the third quarter's budgeted sales, which is:

0.25 x 13,500 = 3,375 units

Therefore, the production needs for the second quarter are:

13,500 + 3,375 - 2,500 = 14,375 units

Next, we need to calculate the raw materials required for the production of 14,375 units. Four pounds of raw materials are required for each unit produced, so the total raw materials required for the second quarter are:

14,375 x 4 = 57,500 pounds

Finally, we need to add the desired ending inventory of raw materials for the second quarter, which should be 10% of the third quarter's production needs in material, or:

0.1 x (15,000 x 4) = 6,000 pounds

Therefore, the total raw materials required for the second quarter, including the desired ending inventory of raw materials, are:

57,500 + 6,000 = 63,500 pounds

Since the raw materials on hand at the start of the year total 4,200 pounds, the scheduled purchases of raw materials for the second quarter are:

63,500 - 4,200 = 59,300 pounds

However, this is not one of the answer choices. The closest answer choice is C, which is 50,800 pounds. This answer choice is calculated by only adding the desired ending inventory of raw materials for the second quarter, without taking into account the actual production needs for the second quarter. This answer choice is not the best choice because it does not reflect the actual raw materials required for production in the second quarter.

The TS Corporation Has Budgeted Sales for the Year as Follows