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    RS Ltd Case Study: Cost Accounting, Production Budget

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    RS Ltd is currently preparing the production budget for Product A and the material purchase budget for material X for the
    forthcoming year. Each unit of Product A requires 5 kgs of material X.

    The anticipated opening stock for Product A is 5,000 units and the company wishes to increase the closing stock by 30%
    by the end of the year.

    The anticipated opening stock for material X is 50,000 kgs and in order to avoid stock-outs the required closing stock has
    been increased to 60,000 kgs.

    The Sales Director has confirmed a sales requirement of 70,000 units of Product A.

    How many units of Product A will need to be produced?
    What will be the purchases budget for material X?

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    Solution Preview

    Production budget Units
    Required sales 70,000
    Required closing stock 6,500
    Less: Anticipated opening stock ...