CIMA BA2 · Chapter 6 · Question 4 of 13
A company plans to produce 18,600 units in March. Each unit uses 3 kg of material costing $4.50 per kg. Opening inventory of material is 6,000 kg and the company plans to reduce material inventory to 5,200 kg by the end of March. What is the material purchases budget for March in $?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $247,500
Explanation
Material required for production = 18,600 x 3 kg = 55,800 kg. Purchases = usage + closing inventory - opening inventory = 55,800 + 5,200 - 6,000 = 55,000 kg. Cost = 55,000 x $4.50 = $247,500.
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