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Masterson Company's budgeted production calls for 72,000 liters in April and 68,000 liters in May of a key raw material that costs $1.90 per liter. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 21,600 liters. What is the budgeted materials need in liters for April

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Answer:

The budgeted material needed for April Production is 50400 liters.

The budgeted material needed to be purchased in  April is 70800 liters.

Explanation:

The opening invetory of material at the start of April is 21600 liters.

The production requirement for April is 72000 litres. Thus, additional material requirement to complete theproduction requirement for the month of April is,

  • Additional material requirement- April Production = 72000 - 21600 = 50400 liters

However, the purchase of material in a month should be enough to meet that month's production requirement along with the 30% production requirement of next month.

30% of May's Production requirement is = 68000 * 30% = 20400 liters

So total purchase of material in April should be,

50400 + 20400 = 70800 liters

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