Sledge Co. manufactures a product requiring 1.5 lbs. of raw material for each finished unit. The beginning inventory of raw materials in March was 5,000 lbs. The company wants an inventory of 2,500 lbs at the end of March. Production for March will be 4,000 units. How many lbs. of raw material must be purchased in March?

a. 6,500 lbs.

b. 2,000 lbs.

c. 3,500 lbs.

d. 1,500 lbs.

c. 3,500 lbs.

Explanation:

Data provided

Desired ending inventory = 2,500 lbs

Beginning inventory = 5,000 lbs

Production cost = 4,000

raw material for each finished unit = 1.5 lbs

The computation of purchase of raw material is shown below:-

Raw materials to be purchased = Budgeted production + Desired ending inventory - Beginning inventory

= (4,000 * 1.5) + 2,500 - 5,000

= 6,000 + 2,500 - 5,000

= 8,500 - 5,000

= 3,500 lbs.

So, for computing the raw material to be purchased we simply applied the above formula.