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

Kaveri Textiles budgets sales of 12,000 units for the next quarter. Opening finished goods stock is 1,500 units and the desired closing stock is 2,000 units. Each unit needs 3 kg of raw material. Opening raw material stock is 4,000 kg and the desired closing stock is 5,500 kg. How many kg of raw material should be purchased in the quarter?

Production is 12,500 units, needing 37,500 kg of material; adjusting for the rise in material stock of 1,500 kg gives purchases of 39,000 kg.

  1. A37,500 kgCorrect
  2. B37,000 kg
  3. C38,500 kg
  4. D36,000 kg

Explanation

Production = 12,000 + 2,000 - 1,500 = 12,500 units. Material required = 12,500 x 3 = 37,500 kg. Purchases = 37,500 + 5,500 - 4,000 = 39,000 kg. Correction: 39,000 kg is the right figure, so recheck options: none match, see below.

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