Saphire Company budgeted the following production in units for the second quarter of the year:

April 45,000

May 38,000

June 42,000

Each unit requires one pound of raw material. Saphire's policy is to have 30% of the following month's production needs for materials in inventory.

A) Raw materials purchases budgeted for May in pounds equal:

a) 39,200

b) 45,600

c) 50,600

d) 42,900

B) Desired beginning inventory for June in pounds equals:

a) 9,575

b) 12,600

c) 10,500

d) 11,400

Instructions are below.

Explanation:

Giving the following information:

Sales:

April 45,000

May 38,000

June 42,000

Each unit requires one pound of raw material. Saphire's policy is to have 30% of the following month's production needs for materials in inventory.

A) Budgeted production= sales + desired ending inventory - beginning inventory

Budgeted production:

Sales=38,000

Ending inventory= 42,000*0.3= 12,600

Beginning inventory= 38,000*0.3= (11,400)

Total= 39,200

B) Desired beginning inventory= budgeted sales*30%

Beginning inventory= 42,000*0.3= 12,600

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