Question

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below:
January February March
budgeted production (in units) 50,000 ? 80,000
budgeted raw materials purchases (in Pounds) 106,000 132,000 188,000
Two pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 30,000 pounds of raw materials on hand on January 1.
Required:
1. Budgeted production for February should be ______________.

Answer 1

Answer:

60,000 units

Explanation:

                                              January         February              

Budgeted production            50,000           60,000   (4)    

Raw materials per unit         2 pounds       2 pounds            

Raw materials needed          100,000         120,000 (3)                            

Add: Ending raw materials    36,000 (2)      48,000                

Raw materials available       136,000 (1)      168,000        

Less: Beginning raw              30,000           36,000            

materials

Budgeted raw materials        106,000        132,000      

Note:

1. Budgeted raw materials for January = Raw materials available - Beginning raw materials

106,000 = Raw materials available - 30,000

Raw materials available = 106,000 + 30,000 = 136,000 pounds

2. Raw materials needed + Ending raw materials = Raw materials available

100,000 + Ending raw materials = 136,000

Ending raw materials = 136,000 - 100,000 = 36,000

3. As the company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs, the raw materials needed for the month of February -

Ending raw materials for January = Raw materials needed for February × 30%

or, 36,000 = Raw materials needed for February × 30%

Raw materials needed for February = 36,000 ÷ 30%

Therefore, Raw materials needed for February = 120,000

4. Budgeted production × Raw materials per unit = Raw materials needed

Budgeted production = Raw materials needed ÷ Raw materials per unit

Budgeted production = 120,000 ÷ 2 pounds = 60,000 units