Asked by Gabriel Matar on May 19, 2024
Verified
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.
Each unit of finished goods requires 2 grams of raw material. The company plans to sell 560,000 units during the year.How much of the raw material should the company purchase during the year?
A) 1,231,000 grams
B) 1,210,000 grams
C) 1,261,000 grams
D) 1,220,000 grams
Raw Material
Basic substances in their natural, modified, or semi-processed states used as inputs to a production process for manufacturing goods.
Beginning Inventory
The value of goods available for sale at the start of an accounting period, carried over from the end of the previous period.
Ending Inventory
The value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases minus cost of goods sold.
- Ascertain forecasted financial indicators, including the cost of goods sold, direct labor costs, and necessary procurements.
- Acquire competencies in predicting and strategizing financial outcomes within a corporate environment.
Verified Answer
May 20, 2024
560,000 units x 2 grams per unit = 1,120,000 grams
Next, we need to add the planned ending inventory of raw materials (120,000 grams) and subtract the planned beginning inventory of raw materials (30,000 grams):
1,120,000 grams + 120,000 grams - 30,000 grams = 1,210,000 grams
Therefore, the company should purchase 1,210,000 grams of raw material during the year. The correct answer is B.
Learning Objectives
- Ascertain forecasted financial indicators, including the cost of goods sold, direct labor costs, and necessary procurements.
- Acquire competencies in predicting and strategizing financial outcomes within a corporate environment.
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