A company produces a product that requires 2 pounds of a raw material. It is forecast that

there will be 6,000 pounds of raw materials on hand at the end of June. At the end of any given

month, the company wishes to have 30% of next month's raw material requirements on hand.

The company has budgeted production of the product for July, August, September, and October

to be 10,000, 12,000, 13,000 and 11,000 units, respectively. As of June 1, the raw material

sells for P1.00 per pound.

9. The cost of inventory is determined using the last-in-first-out (LIFO) method. If the price of raw

material increases 10% as of June 30, what will be the effect of this increase on the cost of

purchases from July to September?

a. P600 increase. c. P9,160 increase.

b. P7,060 increase. d. P60 increase.

10. In the month of September, raw material purchases and ending inventory, respectively, will be

(in pounds):

a. 24,800 and 6,600 c. 13,000 and 3,900

b. 32,600 and 6,600 d. 28,600 and 6,600