A company produces two products, A1 and A2 that are sold to retailers. The budgeted sales volumes for the next quarter are as follows:
Product Units A1 32,000; A2 56,000 ;
The inventory of finished goods is budgeted to increase by 1,000 units of A1 and decrease by 2,000 units of A2 by the end of the quarter.
Materials B3 and B4 are used in the production of both products. The quantities required of each material to produce one unit of the finished product and the purchase prices are shown in the table below:
B3, B4 ,A1 8 kg, 4 kg; A2, 4 kg 3 kg; Purchase price per kg $1.25, $1.80; Budgeted opening inventory 30,000, kg 20,000 kg ;
The company plans to hold inventory of raw materials, at the end of the quarter, of 5% of the quarter’s material usage budget.
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