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ABC Company has the following budgeted sales for the next six-month period:
There were 69,000 units of finished goods in inventory at the beginning of January.
Plans are to have an inventory of finished products that equals 100% of the following month sales plus 25% of the second month sales.
Two kilograms of raw materials are required for each unit produced. From January, each kilogram of material costs $20 (up from $18 in December last year). Inventory levels for materials are equal to 40% of the needs for the next month.
ABC Company uses a FIFO inventory method for both raw material and finished goods.
2a. What is the production budgets in units for January and February?
2b. What is the materials usage budget in kilograms and dollars for January?
2c. What is the materials purchases budget in kilograms and dollars for January?