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Budgeting Problem: Example

You have been asked to find the number of kilograms that will have to be purchased in the last quarter of this year (October, November and December). The following budget information has been provided:

October November December January February
Sales in units 120,000 90,000 120,000 105,000 120,000

- There were 18,000 units in Finished Goods Inventory at October 1st. Company policy is to maintain a Finished Goods Inventory equal to 15% of the following months sales
- Direct materials Inventory balance at October 1st was 17,325 kilograms. Each unit requires 0.50 kilograms; and company policy is to ensure that ending inventory is equal to 30% of the following months production needs

Based on this information which of the following represents the number of kilograms of direct materials to be purchased in October, November and December respectively?

a. 54,600; 50,738; 54,600
b. 54,600; 50,738; 57,300
c. 56,850; 48,488; 58,425
d. 57,750; 47,250; 58,875
e. 56,850; 48,488; 58,426

Solution Summary

This solution assists with the budgeting problem attached.