Graham Corporation's budgeted production schedule, by quarters, for the coming year is as follows:Quarter 1 = 22,500 unitsQuarter 2 = 19,000 unitsQuarter 3 = 17,000 unitsQuarter 4 = 24,000 unitsEach unit of product requires three pounds of direct material. The company's policy is to begin each quarter with 30% of that quarter's direct materials production requirements.Graham expects to have 50,000 pounds of direct materials on hand at the beginning of Quarter 1.What would be Graham's budgeted direct materials purchases (in pounds) for the first quarter?
What will be an ideal response?
34,600 pounds
1. Desired ending inventory, Quarter 1 = [(19,000 units × 3 lbs./unit) × 0.30] = 17,100 lbs.
2. Lbs. of direct materials needed for Quarter 1 production = 22,500 units × 3 lbs./unit = 67,500 lbs.
3. Required purchases (pounds), Quarter 1 = Materials required for production + Desired ending inventory ? Beginning inventory = 67,500 lbs. + 17,100 lbs. ? 50,000 lbs. = 34,600 lbs.
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