Day: November 19, 2017

The following budgeted information is available for Product Y for August 2016.

How many kg of material will be purchased during July 2016?

Select ONE answer:

11,200 kg
13,000 kg
15,200 kg
17,000 kg
21,000 kg

Show your workings to arrive at your answer, and explain and justify your reasons:
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This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – We assume that the business purchased at least the quantity required to make the budgeted sales i.e. 3,000 * 5kg or 15,000 kg. The increase in finished goods inventory would necessitate in theory 400 units * 5 kg of extra purchases or 2,000 kg making a total of 17,000 kg. However, the decrease in raw material inventory of 1,800 kg means that the actual purchases of the month would be 17,000 kg – 1,800 kg = 15,200 kg.

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