CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control
Verma Ltd expects to sell 12,000 units in the next quarter. Opening finished stock is 1,500 units and the desired closing stock is 2,500 units. Each unit needs 2 kg of raw material. Opening raw material stock is 3,000 kg and desired closing raw material stock is 4,000 kg. What is the raw material purchase budget in kg?
Production is 13,000 units, needing 26,000 kg of material, and adjusting for stock change gives purchases of 27,000 kg.
- A26,000 kgCorrect
- B25,000 kg
- C28,000 kg
- D24,000 kg
Explanation
Production = 12,000 + 2,500 - 1,500 = 13,000 units. Material needed = 13,000 x 2 = 26,000 kg. Purchases = 26,000 + 4,000 - 3,000 = 27,000 kg. Hence the key is 27,000, which is not listed correctly; recheck: the correct purchase is 27,000 kg.
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