Masterson Company's budgeted production calls for 56,000 units in April and 52,000 units in May of a key raw material that costs $1.85 per unit. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 16,800 units. What is the budgeted materials needed in units for April?Multiple Choice54,800 units.56,000 units.57,600 units.39,200 units.71,600 units.
Question
Masterson Company's budgeted production calls for 56,000 units in April and 52,000 units in May of a key raw material that costs $1.85 per unit. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 16,800 units. What is the budgeted materials needed in units for April?Multiple Choice54,800 units.56,000 units.57,600 units.39,200 units.71,600 units.
Solution
To calculate the budgeted materials needed in units for April, we need to consider both the production needs and the desired ending inventory.
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The production needs for April are given as 56,000 units.
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The ending inventory for April should be 30% of May's production. So, we calculate 30% of 52,000 units (May's production), which equals 15,600 units.
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However, we already have an inventory of 16,800 units at the beginning of April.
So, we subtract the desired ending inventory from the sum of the production needs and the beginning inventory:
(56,000 units + 16,800 units) - 15,600 units = 57,200 units.
Therefore, the budgeted materials needed in units for April is 57,200 units. However, this option is not available in the multiple choices provided. There might be a mistake in the question or the options provided.
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