2 Resear Company sells modems Resear desires to hold a finis

2. Resear Company sells modems. Resear desires to hold a finished goods inventory equal to 100% of the next month\'s sales requirement of modems. The beginning finished goods inventory is 1,200 units. Forecasted unit sales for Apri and the net three months are as follows: April May 850 June 925 July 1,000 800 The production of one finished unit requires 5 pounds of raw material. The company desires to have a one-month supply of raw materials as the ending inventory for each month. The beginning inventory of raw materials is 6,190 pounds. Prepare a direct materials purchases budget (in pounds) for April. (10 points

Solution

SOLUTION:

Production Budget for April
Particulars	April	May	June	July
Sales	800	850	925	1,000
Desired finished goods ending inventory( 100% * next month’s sales)	850	925	1,000
Total Requirement	1,650	1,775	1,925	1,000
Minus: Finished goods beginning inventory	1,200	850	925
Units to be produced	450	925	1,000
Raw Materials Budget for April
Particulars	April	May	June
Production requirement, 5 lbs. per finished goods unit	2,250	4,625	5,000
Desired raw materials ending inventory	4,625
Total requirement	6,875
Minus: Raw materials beginning inventory	6,190
Raw materials to be purchased	685