Production and purchases budgets Pelican Co. is forecasting sales of 40,300 unit

Question

Production and purchases budgets Pelican Co. is forecasting sales of 40,300 units of product for October. To make one unit of finished product, 10 pounds of raw materials are required. Actual beginning and desired ending inventories of raw materials and finished goods are:

October 1(Actual) October 31(Desired)
Raw materials (pounds) 48,550 44,300
Finished goods (units) 3,850 5,400

Required:
a. Calculate the number of units of product to be produced during October.
b. Calculate the number of pounds of raw materials to be purchased during October.

Explanation / Answer

a. Calculate the number of units of product to be produced during October.

Estimated Sales for October                    40,300 units
Add : Desired Ending FG inventory            5,400 units
Total production required                       45,700 units
Less : Beginning FG inventory                3,850 units
No. of units to be produced during Oct. 41,850 units

b. Calculate the number of pounds of raw materials to be purchased during October.

No. of units to be produced during Oct.   41,850 units
One unit of finished product requires         X 10 pound
Total raw materisl reuired                    418,500 pound
Add : Desired Ending inventory              44,300 pound
Total RM required                               462,800 pound
Less : Beginning inventory                    48,550 pound
Raw materials to be purchased          414,250 pound

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