there are a 140 pounds of flour in inventry on october 1. 1400 loaves are to be produced in october and 1500 loaves in november. flour costs $3 per pound and 1/2 pound is used per loaf. with the policy of 20% of next month's needs being in ending inventory, what is the budget for flour purchases in october

Question

Quentin Duffy

Business

4 November, 04:34

there are a 140 pounds of flour in inventry on october 1. 1400 loaves are to be produced in october and 1500 loaves in november. flour costs $3 per pound and 1/2 pound is used per loaf. with the policy of 20% of next month's needs being in ending inventory, what is the budget for flour purchases in october

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Answers (1)

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Raina Keith · Answer 1

The budgeted floor purchases for October is 710 pounds and the cost of 710 pounds of flour is $2130

Explanation:

The flour needed to meet the October's production requirement for loaves is,

1400 * 1/2 = 700 pounds

The desired ending inventory of flour in October = 1500 * 1/2 * 0.2 = 150 pounds

The purchases for October should be enough to meet the desired ending inventory for October and the remaining Production requirement for October after adjusting for opening inventory.

Purchases = Closing Inventory + Production - Opening Inventory

Purchases = 150 + 700 - 140 = 710 pounds

The cost of purchases = 710 * 3 = $2130