A company’s production budget requires the following units of a single product for the upcoming year: 1st quarter 60,000 units 2nd quarter 80,000 units 3rd quarter 90,000 units 4th quarter 70,000 units Each unit requires two pounds of material. The company has a policy of keeping a stock of material on hand at the end of each quarter equal to 25% of the next quarter's production needs for material. A total of 30,000 pounds of material are on hand to start the year. Budgeted purchases of material for the second quarter would be:

165,000 pounds

Explanation:

A Purchase Budget is required to determine the quantities and cost of purchases required for use in production.

Materials Purchase Budget for Second Quarter (Pounds)

Budgeted Production Materials (80,000 x 2)                    160,000

Add Budgeted Closing Materials (90,000 x 2 x 25%)        45,000

Total Materials                                                                     205,000

Less Budgeted Opening Materials (80,000 x 2 x 25%)    (40,000)

Budgeted Material Purchase (pounds)                               165,000

Therefore,

Budgeted purchases of material for the second quarter would be 165,000 pounds

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