Zhang Industries budgets production of 300 units in June and 310 units in July.Each finished unit requires 4 pounds (lbs.)of raw material K,which costs $5 per pound.Each month's ending inventory of raw materials should be 30% of the following month's budgeted production.The June 1 raw materials inventory has 360 pounds of raw material K.Compute the budgeted purchases for raw material K in pounds for June.
A)1,200 lbs.
B)1,240 lbs.
C)1,212 lbs.
D)1,220 lbs.
E)880 lbs.

Question

Quizplus · Accepted Answer

1) Budgeted Production for June = 300 units
Raw material K required for each unit = 4 lbs
Total Raw material K required for June = 4 x 300 = 1200 lbs

2) June's ending inventory of raw materials should be 30% of July's budgeted production.
Budgeted Production for July = 310 units
Raw Material K required for each unit = 4 lbs
Total Raw Material K required for July = 4 x 310 = 1240 lbs
June's ending inventory of raw material = 30% of 1240 = 372 lbs

3) June 1 raw materials inventory = 360 lbs
Total raw material K required for June = 1200 lbs
Required Raw material K purchases for June = Total Raw Material K required for June - June 1 raw materials inventory + June's ending inventory of raw material
= 1200 - 360 + 372
= 1212 lbs

Therefore the budgeted purchases for raw material K in pounds for June is 1,212 lbs.

Zhang Industries Budgets Production of 300 Units in June and 310