Skip to content

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

Kaveri Plastics budgets production of 8,000 units in a month. Each unit needs 3 kg of raw material. Opening raw material stock is 4,000 kg and the closing stock is to be 6,500 kg. What quantity of material must be purchased?

The purchase requirement is 26,500 kg. Production needs 24,000 kg (8,000 units at 3 kg), and the stock build-up of 2,500 kg (closing 6,500 less opening 4,000) must also be bought, giving 24,000 plus 2,500 equals 26,500 kg.

  1. A21,500 kg
  2. B26,500 kgCorrect
  3. C24,000 kg
  4. D28,000 kg

Explanation

Material needed for production = 8,000 x 3 = 24,000 kg. Purchases = Consumption + Closing stock - Opening stock = 24,000 + 6,500 - 4,000 = 26,500 kg. The 21,500 kg option subtracts the closing stock and adds the opening stock, which reverses the adjustment.

Did you get it right without looking?

One question tells you little. A timed set on Budgets and Budgetary Control shows your real accuracy, how long you take and where you lose marks.

Practise Budgets and Budgetary ControlFree diagnostic mock

More Budgets and Budgetary Control questions