36.Background
The single product manufactured by Allegrop Co requires 2.5 kg of a single raw material per unit of product. The material costs $9.00 per kg.
Budgets are being prepared and the following additional information is available:
(1)Budgeted sales for the next three periods are:
Period 1 38,600 units
Period 2 26, 500 units
Period 3 32,100 units
(2)Opening inventory of finished goods in each period is budgeted to be 25% of the
budgeted sales demand in that period.
(3)Opening inventory of raw material in each period is budgeted to be one third of
the budgeted material usage in that period.
Task 1
Calculate the budgeted inventory of finished goods at the beginning of Period 1.
()units
Task 2
Calculate the budgeted production volume of the product in Period 2.
()units
Task 3
If the budgeted production in Period 3 is 31,600 units and in Period 4 is 28,900 units:
Tasks 4 and 5
It is possible that raw material availability will be restricted to 75,000 kg per period. If this situation arises, 75,000 kg of the material will be purchased and used in each period.Any sales demand not satisfied in a period would be lost.
Task 4
Assume that the restriction on raw material supply occurs throughout the budget period and that there would be no inventory of raw material or finished goods at the beginning of Period 1. In this circumstance:
What would be the finished goods inventory at the end of Period 2?
()units
Task5.
Which of the following may enable Allegrop Co to increase output?
(1) Introduce a perpetual inventory system
(2) Introduce continuous stocktaking
(3) Use raw material more efficiently
(4) Take advantage of settlement discount
A.1,2and4
B.1and3
C.3 only
D.2,3and4.
