On September 30 of Year 1, JayBob Company had raw materials inventory of 5,000 p
ID: 2469905 • Letter: O
Question
On September 30 of Year 1, JayBob Company had raw materials inventory of 5,000 pounds. Starting in October, JayBob intends to have an inventory policy of maintaining ending raw materials inventory at the end of every month equal to the nextTWO months’ production needs. For example, ending inventory at the end of October should be equal to forecasted raw materials needs for November production plus forecasted raw materials needs for December production.
Four pounds of raw materials are needed in the production of one finished unit.
Forecasted PRODUCTION for the months October, Year 1 through December, Year 1 is as follows.
October 4,300 units
November 1,000 units
December 700 units
What is the amount of budgeted RAW MATERIALS PURCHASES for October?
17,200 pounds
19,000 pounds
21,200 pounds
24,000 pounds
17,000 pounds
17,200 pounds
19,000 pounds
21,200 pounds
24,000 pounds
17,000 pounds
Explanation / Answer
Amount of budgeted RAW MATERIALS PURCHASES for October = 19,000 pounds
Note:
Materials required to meet the production target = 4,300 units X 4 pounds = 17,200 pounds
Desired ending balance of material at the end of the month = Raw materials required for November production + Raw materials required for December production
Raw materials required for November production = 1,000 units X 4 pounds = 4,000 pounds
Raw materials required for December production = 700 units X 4 pounds = 2,800 pounds
Desired ending balance of material at the end of the month = 4,000 pounds + 2,800 pounds = 6,800 pounds
Particulars October Materials required to meet the production target 17,200 Add: Desired ending balance of material at the end of the month 6,800 24,000 Less: Beginning balance 5,000 Amount of budgeted RAW MATERIALS PURCHASES for October 19,000Related Questions
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