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20 April, 12:05

The tobler company has budgeted production for next year by quarter as follow:

Quarter first second third fourth

Units 10,000 12,000 16,000 14,000

Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000pounds. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in the third quarter would be:

(A) 63,200 pounds

(B) 62,400 pounds

(C) 56,800 pounds

(D) 50,400 pounds

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  1. 20 April, 12:07
    0
    Purchases of Raw Material = 63200 Pounds

    so correct option is (A) 63,200 pounds

    Explanation:

    solution

    first we find Raw material that is required for production for 3rd quarter so

    Raw Material Required for production = Production in units * Raw material per unit required ... 1

    put here value

    Raw Material Required for production = 16000 * 4

    Raw Material Required for production = 64000

    and

    now Beginning Inventory of Raw material for 3rd quarter so we know that Ending inventory of 2nd quarter become beginning inventory of 3rd quarter so

    Ending Inventory of 2nd quarter = 3rd Quarter Production * 10%

    Ending Inventory of 2nd quarter = (16000 * 4) * 10%

    Ending Inventory of 2nd quarter = 6,400

    so now we get Ending Inventory of 3rd Quarter Ending Inventory of 3rd quarter = 4th Quarter Production * 10%

    Ending Inventory of 3rd quarter = (14000 * 4) * 10%

    Ending Inventory of 3rd quarter = 5,600

    so here we get Purchases of Raw Material that is

    Purchases of Raw Material = Raw Material Required for production + Ending Inventory of 3rd quarter - Beginning Inventory of 3rd quarter ... 2

    put here value

    Purchases of Raw Material = 64000 + 5600 - 6400

    Purchases of Raw Material = 63200 Pounds

    so correct option is (A) 63,200 pounds
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