Question

YANNA Company has budgeted production for next year as follows in quarters:

	first	second	third	fourth
Production in units	61,000	81,000	91,000	71,000

Three pounds of material called QOU are required for each unit produced. The company has a policy of maintaining a stock of material QOU on hand at the end of each quarter equal to 20% of the next quarter's production needs for material QOU. A total of 31,000 pounds of material QOU are on hand to start the year. Each pound of material AX costs $10.  Budgeted purchases of material AX in dollars for the second quarter would be:

A.

$810,000

B.

$1,580,400

C.

$2,916,000

D.

$2,430,000

E.

$2,970,000

F.

$792,000

G.

$2,490,000

H.

$2,343,000

Answer 1

	Second quarter
Budgeted production	81000
Material per unit	3
Total material required for production	243000
Add: ending inventory required (91000*3*20%)	54600
Less: beginning inventory (243000*20%)	(48600)
Budgeted purchase (pound)	249000
Cost per pound	10
Budgeted purchases of material AX	$2490000

Option G. is correct answer.