Zhang Industries budgets production of 300 units in June and 310 units in July.Each finished unit requires 4 pounds 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 cost of purchases for raw material K for June.
A)$4,400.
B)$6,000.
C)$6,200.
D)$6,060.
E)$6,100.

Question

Quizplus · Accepted Answer

To determine the budgeted cost of purchases for raw material K for June, we need to calculate the amount of raw material K needed for production, as well as the desired ending inventory for July.

- Production needs: 4 pounds per unit x 300 units = 1,200 pounds
- Desired ending inventory for July: 30% of 310 units x 4 pounds per unit = 372 pounds

Therefore, the total amount of raw material K needed for June and July is:

1,200 + 372 - 360 (beginning inventory) = 1,212 pounds

The budgeted cost of purchases is then:

1,212 pounds x $5 per pound = $6,060

So the correct answer is D.

Zhang Industries Budgets Production of 300 Units in June and 310