Prestwich Company has budgeted production for next year as follows: 10 pounds of

Question

Prestwich Company has budgeted production for next year as follows:
  

10 pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 15% of the next quarter's production needs for material A. A total of 9,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:

Explanation / Answer

Quarter First Second Third Fouth Prodcution In Units                    10,000     71,000    81,000    61,000 Material required each unit in Pounds                           10            10           10           10 Total material required for A                  100,000 710,000 810,000 610,000 Opening balance 9000 106,500 121,500 Closing Balance Required for next Quarter                  106,500 121,500    91,500            -   Material Need t purchase                  197,500 725,000 780,000 So Budgeted material Purchase of A for Second Quarted would be 725,000 pounds

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