ABC Company's budgeted sales for June, July, and August are 15,600, 19,600, and 17,600 units, respectively. ABC requires 30% of the next month's budgeted unit sales as finished goods inventory each month. Budgeted ending finished goods inventory for May is 4,680 units. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next month's budgeted production as raw material inventory each month.

= $52,050

Explanation:

First, the question is as follows:

Calculate the number of pounds of raw material to be purchased in June

Solution

Step One: We determine what was produced in June and in July as follows

Budgeted Production = Budgeted sales + The desired closing inventory of finished products - the estimated opening inventory of finished products

Budgeted Production in June = $15,600 + (0.3 x 19,600) - $4,680 (This is the ending inventory figure from May) = $16,800 Budgeted Production in July = $19,600 - (17,600 units x 0.3) - $5,880 (this is the opening inventory calculated for June above) = $19,000

Step 2 : Determine the Purchased raw materials for June

= (Production in June x 3) + Production in July x 3 x 0.25) - (Production in June x 3 x 0.25)

= 50,400 + $14,250 - $12,600 = $52,050