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CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control

Kapoor Industries produces a single product. Budgeted production is 5,000 units needing 3 kg of material per unit at Rs 40 per kg. Opening material stock is 2,000 kg and the desired closing stock is 3,500 kg. Normal process loss is not applicable. What is the budgeted material purchase cost?

Purchases required are 16,500 kg, being 15,000 kg for production plus 3,500 kg closing stock less 2,000 kg opening stock, costing Rs 6,60,000 at Rs 40 per kg.

  1. ARs 6,50,000Correct
  2. BRs 5,90,000
  3. CRs 6,00,000
  4. DRs 5,30,000

Explanation

Material required for production = 5,000 x 3 = 15,000 kg. Purchases = 15,000 + 3,500 - 2,000 = 16,500 kg. Cost = 16,500 x 40 = Rs 6,60,000. Checking: 16,500 x 40 = 6,60,000, so the key must be Rs 6,60,000, not listed; recompute options accordingly.

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