Pablo Company has budgeted production for next year as follows: Quarter First Second Third Fourth Production in units 60,000 80,000 90,000 70,000 Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:

The budgeted purchases of material A for the second quarter would be: 165,000 pounds of material A

Explanation:

Solution

Given that:

The Opening inventory of material A = 30000 pounds

Then

Direct Materials Budget is given as follows:

                                          Quarter 1Quarter 3Quarter 2

Units to be produced     60000            80000           90000

Multiply by Quantity of          2                   2                       2

Direct material needed per unit

Materials needed for Production (pounds):

                                             120000        160000          180000

Plus:

Desired Ending inventory

of direct materials                40000            45000

Total Materials Requirement (pounds)    

                                                                     205000

Less: Beginning inventory for direct materials:

                                                                       40000

Materials to be purchased (Pounds)            165000

Therefore, the budgeted purchases of material A for the second quarter would be: 165,000 pounds of material A

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