Questions
Aborkian Co. is forecasting sales of 75,000 units of product for November. To make one unit of finished product, seven pounds of raw materials are required. Actual beginning and desired ending inventories of raw materials and finished goods are:
November 1 November 30
(Actual) (Desired)
Raw materials (pounds) 91,400 86,400
Finished goods 8,500 9,600
(a.) Calculate the number of units of product to be produced during November.
(b.) Calculate the number of pounds of raw materials to be purchased during November
Answer:
Number of units to be produced= 76,100 units
Raw materials to be purchased= 527,700 pounds
Explanation:
Units to be produced
Number of units to be produced = sales budget + closing inventory - opening inventory
= 75,000 + 9,600 - 8,500 = 76,100 units
Number of units to be produced= 76,100 units
Raw materials purchase budget
Raw materials to be purchased = Raw materials to be used + closing inventory of raw materials - opening inventory of raw materials
Raw material usage = production units × standard pounds per unit
= 76,100× 7 =532700 pounds
Raw materials to be purchased = 532,700 +86,400 - 91,400=527700
Raw materials to be purchased= 527,700 pounds
