Ricardo, Inc., is preparing its master budget for the second quarter. The follow
ID: 2481017 • Letter: R
Question
Ricardo, Inc., is preparing its master budget for the second quarter. The following sales and production data have been forecasted:
April
May
June
July
August
Unit sales
400
500
520
480
540
Finished goods inventory on March 31: 120 units
Raw materials inventory on March 31: 450 pounds
Desired ending inventory each month:
Finished goods: 30% of next month's sales
Raw materials: 25% of next month's production needs
Number of pounds of raw material required per finished unit: 4 lbs.
How many pounds of raw materials should be purchased in April?
April
May
June
July
August
Unit sales
400
500
520
480
540
Explanation / Answer
April Unit sales 400 March month closing stock 120 units to be produced 280 raw material required 1120 (280*4) Raw material available 450 balance raw material 670 Desired ending inventory 150 500*.3 Raw material required 600 150*4 raw material to be purchased 1270 (600+670)
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