The Jung Corporation\'s production budget calls for the following number of unit

Question

The Jung Corporation's production budget calls for the following number of units to be produced each quarter for next year: Budgeted production Quarter 1 45,000 units Quarter 2 38,000 units Quarter 3 34,000 units Quarter 4 48,000 units Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter's direct material requirements. Budgeted direct materials purchases for the third quarter would be: Multiple Choice 114,600 pounds 89,400 pounds 38,200 pounds 29,800 pounds

Explanation / Answer

A.114,600 pounds.

direct material purchases = production requirement + closing stock - opening stock

here,

production requirement = 34,000 units * 3 pounds each unit =>102,000 pounds.

closing stock = next quarters requirement * 30% =>[48,000*3 pounds]*30%

=>43,200.

opening stock = current month's requirement *30%

=>[34,000 *3 pounds]*30%=>30,600 pounds.

now,

budgeted material purchase = 102,000 + 43,200 - 30,600 =>114,600 pounds.

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