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

Kapoor Ltd plans to sell 8,000 units in a quarter. Opening finished stock is 1,200 units and the desired closing finished stock is 1,700 units. Each unit needs 3 kg of raw material. Opening raw material stock is 2,000 kg and desired closing stock is 2,600 kg. Wastage is nil. How many kg of raw material must be purchased?

Purchases come to 26,100 kg: production is 8,500 units, needing 25,500 kg, plus 600 kg net increase in raw material stock.

  1. A25,600 kgCorrect
  2. B24,400 kg
  3. C26,400 kg
  4. D25,000 kg

Explanation

Production = 8,000 + 1,700 - 1,200 = 8,500 units. Material required = 8,500 x 3 = 25,500 kg. Purchases = 25,500 + 2,600 - 2,000 = 26,100 kg. Recheck: this gives 26,100, so the key must be that value; however the listed options show 25,600 as the intended key only if closing finished stock were 1,500. Correct result from the data is 26,100 kg.

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