Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows. Month Units April May June 2,550 2,675 2,390 The target ending inventory of finished products is as follows. March 31 April 30 May 31 June 30 2,000 2,230 2,200 2,310 Two units of material are required for each unit of finished product. Production for July is estimated at 2,700 units to start building inventory for the fall sales period. Rensing's policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month's production requirements. Raw materials are expected to cost $4 per unit throughout the period. Calculate the May raw materials purchases in dollars.

Answer 1

Correct answer--------$20,580

Working

Rensing Ltd.
	April	May	June
Units to be sold	2550	2675	2390
Plus: Desired Ending Inventory	2230	2200	2310
Total needed	4780	4875	4700
Less : Beginning Inventory	2000	2230	2200
Units to Produce	2780	2645	2500
Raw material needed per unit	2	2	2
Raw material needed for Production	5560	5290	5000
Budgeted Ending Inventory	2645	2500
Total material requirements		7790
Beginning Inventory		2645
material to be Purchased		5145
Cost per units of Raw material		$               4.00
Total budgeted raw material cost		$    20,580.00