Garry's Corporation's most recent production budget indicates the following required production:

October November December

Required Production (units) 210,000 175,000

110,000

Each unit of a finished product requires 5 pounds of raw materials. The company maintains raw materials inventory equal to 25% of the next month's expected production needs.

How many pounds of raw material should Garry plan on purchasing for the month of November?

A. 893,500

B. 793,750

C. 1,006,250

D. 1,012,500

Option B, 793,750 is the correct option

Explanation:

October November December

Production (210,000,175,000,110,000) * 5 1,050,000 875,000 550,000

Opening inventory - (218,750) (137,500)

Closing inventory (25% of next production) 218,750 137,500 -

November purchases of raw material 793,750

October closing inventory = 25%*875,000

November closing inventory=25%**550,000

= 137,500.00

The quantity of raw materials to be purchased in November is 793,750

The rationale is that opening inventory of raw materials is already in stock hence should be deducted from planned production volume