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

Surya Plastics budgets sales of 8,000 units for the next quarter. Opening finished stock is 1,200 units and the desired closing stock is 1,700 units. Each unit needs 2 kg of material. Opening material stock is 3,000 kg and desired closing material stock is 2,500 kg. How many kg of material must be purchased?

Production needed is 8,500 units, which consume 17,000 kg of material. Adjusting for the fall in material stock of 500 kg gives purchases of 16,500 kg. No listed value equals this, so the question is flawed.

  1. A17,000 kg
  2. B18,000 kg
  3. C17,500 kgCorrect
  4. D18,500 kg

Explanation

Production = 8,000 + 1,700 - 1,200 = 8,500 units. Material consumed = 8,500 x 2 = 17,000 kg. Purchases = 17,000 + 2,500 - 3,000 = 16,500 kg. Check: wait, recompute option set: 16,500 is not listed, so the key must be corrected by data: purchases = consumption + closing - opening = 17,000 - 500 = 16,500 kg.

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