ICAEW BIP · Chapter 7 · Question 2 of 10
A company plans to produce 18,600 units in a quarter. Each unit uses 3 kg of material M, which costs £4.20 per kg. Opening inventory of material M is 6,000 kg and closing inventory is to be 7,500 kg. What is the material purchases budget for the quarter, in £?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £240,660
Explanation
Material usage = 18,600 units x 3 kg = 55,800 kg. Purchases = usage + closing inventory - opening inventory = 55,800 + 7,500 - 6,000 = 57,300 kg. Cost = 57,300 kg x £4.20 = £240,660.
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