Question

Sartain Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.

Beginning Inventory Ending Inventory
Finished goods (units) 28,000 78,000
Raw material (grams) 58,000 48,000


Each unit of finished goods requires 3 grams of raw material.


If the company plans to sell 630,000 units during the year, how much of the raw material should the company purchase during the year?

2,040,000 grams

2,058,000 grams

2,030,000 grams

2,088,000 grams

Answer 1

2,030,000 grams

Step-by-step explanation:

total need = budgeted unit sales + desired ending finished good inventory

= 630,000 + 78,000

= 708,000

Required production in units = total needs - beggining goods inventory

= 708,000 - 28,000

= 680,000

total raw materials needed = Raw materials required for production (3*Required production in units) + desired ending finished goods inventory

= 3*680,000 + 48,000

=2,088,000

required raw material purchases in grams = total raw materials needed - beggining fineshed good inventory

= 2,088,000 - 58,000

= 2,030,000

Therefore, The raw material that the company pshould purchase during the year is 2,030,000 grams