A sporting goods manufacturer budgets production of 57,000 pairs of ski boots in

Question

A sporting goods manufacturer budgets production of 57,000 pairs of ski boots in the first quarter and 48,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 25% of the following quarter's material needs. Beginning inventory for this material is 28,500 kg and the cost per kg is $7. What is the budgeted materials need in kg. in the first quarter? Multiple Choice 114,000 kg. 109,500 kg 42,500 kg. 138,000 kg 166,500 kg

Explanation / Answer

Answer is 138,000 kg

First Quarter:

Budgeted Production (units) = 57,000 pairs
Raw Materials required per unit = 2 kg

Total Raw Materials required to meet production = Budgeted Production (units) * Raw Materials required per unit
Total Raw Materials required to meet production = 57,000 * 2
Total Raw Materials required to meet production = 114,000 kg

Desired Ending Raw Materials Inventory = 25%*Total Raw Materials required to meet production of Second Quarter
Desired Ending Raw Materials Inventory = 25%*96,000
Desired Ending Raw Materials Inventory = 24,000 kg

Budgeted Materials need = Total Raw Materials required to meet production of First Quarter + Desired Ending Raw Materials Inventory
Budgeted Materials need = 114,000 + 24,000
Budgeted Materials need = 138,000 kg

Second Quarter:

Budgeted Production (units) = 48,000 pairs
Raw Materials required per unit = 2 kg

Total Raw Materials required to meet production = Budgeted Production (units) * Raw Materials required per unit
Total Raw Materials required to meet production = 48,000 * 2
Total Raw Materials required to meet production = 96,000 kg

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