Asked by Tristen Adams on Jun 25, 2024
Verified
A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year.Each pair of boots requires 2 kilograms (kg) of a key raw material.The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs.Beginning inventory for this material is 18,000 kg and the cost per kg is $8.What is the budgeted materials purchases cost for the first quarter?
A) $720,000.
B) $672,000.
C) $576,000.
D) $729,600.
E) $864,000.
Raw Materials Inventory
The cost of the materials that are to be used in production and are currently stored within a company.
Budgeted Purchases Cost
Refers to the estimated expense for acquiring goods over a specific period, often used in planning and controlling inventory levels.
Ski Boots
Footwear specifically designed for skiing, providing support and enabling the skier to control the skis.
- Understand the principle of estimating materials required, taking into account production needs and inventory demands.
Verified Answer
First quarter: 45,000 x 2 = 90,000 kg
Second quarter: 30,000 x 2 = 60,000 kg
We also need to calculate the ending inventory for each quarter:
First quarter: 60,000 x 0.2 = 12,000 kg
Second quarter: 90,000 x 0.2 = 18,000 kg
Now, we can calculate the materials purchases needed for each quarter:
First quarter: (90,000 + 12,000 - 18,000) - 18,000 = 66,000 kg
Second quarter: (60,000 + 18,000 - 12,000) - 18,000 = 48,000 kg
Finally, we can calculate the cost of the materials purchases for the first quarter:
66,000 kg x $8/kg = $528,000
Therefore, the answer is B) $672,000.
Learning Objectives
- Understand the principle of estimating materials required, taking into account production needs and inventory demands.
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