ACCA Applied Knowledge · Management Accounting · Budget preparation
Zeta Co budgets to sell 8,000 units next period. Opening inventory of finished goods is 1,500 units and closing inventory is planned at 2,300 units. Each unit needs 3 kg of material. Opening material inventory is 4,000 kg and closing material inventory is planned at 5,500 kg. How many kilograms of material should be purchased?
Production is 8,800 units, using 26,400 kg of material. Adding the increase in material inventory of 1,500 kg gives purchases of 27,900 kg.
- A28,500 kg
- B29,700 kgCorrect
- C27,300 kg
- D26,100 kg
Explanation
Production = 8,000 + 2,300 - 1,500 = 8,800 units. Material used = 8,800 x 3 = 26,400 kg. Purchases = 26,400 + 5,500 - 4,000 = 27,900 kg. Check: 27,900 is not among options as written, so recompute: 26,400 + 1,500 = 27,900. The listed key must therefore be corrected to 27,900.
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