Model 4: Materials purchased or Procurement budget
The sales director of a manufacturing company reports that he plans to sell 30,000 units of a product in the next year.
The production manager consults the storekeeper and casts his figures as follows:
Two kinds of raw materials X and Y are required to manufacture the product. Each unit of the product requires 3 units of X and 4 units of Y.
The estimated opening balances at the commencement of the next year are:
Finished product: 5,000 units: X = 6,000 units and Y = 7,000 units.
The desirable closing balance at the end of the next year are:
Finished products: 8,000 units: X = 7,500 units and Y = 10,000 units.
You are required to draw up a quantitative chart showing material-purchase budget for the next year.