GS has budgeted sales for the next two years of 24,000 units per annum spread evenly throughout
Question:
GS has budgeted sales for the next two years of 24,000 units per annum spread evenly throughout both years. The estimated opening inventory of finished goods at the start of the next year is 500 units but GS now wants to maintain inventory of finished goods equivalent to one month's sales.
Each unit uses 2kg of material. The estimated opening raw material inventory at the start of the next year is 300kg but GS now wants to hold sufficient raw material inventory at the end of each month to cover the following month's production.
The change in the policy for inventory holding for both raw materials and finished goods will take effect in the first month of next year and will apply for the next two years.
The budgeted material cost is $12 per kg. What is the material purchases budget for the next year in $?