Answer:
Cost of raw material to be purchased for the four quarters of Year 2 is:
Quarter 1: $720,000
Quarter 2: $979,200
Quarter 3: $1,252,800
Quarter 4: $921,600
Total year: $3,873,600
Explanation:
Key explanations:
Units of raw material needed to meet production (A*B) =
Required production in units of finished goods (A)
× Units of raw material needed per unit of finished goods (B)
So, for example for year 1: 94,000 × 4 = 376,000, same goes for other quarters.
Total raw material units needed are achieved by adding the ending inventory to units of raw material needed to meet production.
Ending inventory = 20% of the following quarter,
therefore, ending inventory for Quarter 1 = 496,000 × 20% = 99,200
Similarly, ending inventory of 1 quarter is the opening inventory of the other quarter, therefore, 99,200 ending inventory of quarter 1, is the opening inventory of quarter 2.
