Yummy Foods expects to have 55,000 pounds of raw materials inventory on hand on March 31, the end of the current year. The company budgets the following production (in units) for April through July, inclusive:

- April: 139,000
- May: 149,000
- June: 177,000
- July: 139,000

At the end of each month, the firm desires its ending raw material inventory to be 15% of the next month's production needs. Each finished unit requires three pounds of raw materials.

What are Yummy Foods’ budgeted purchases (in pounds) of raw materials for June?

Multiple Choice:
a) 513,900
b) 531,000
c) 548,100
d) 593,550
e) 673,200

To calculate the budgeted purchases of raw materials for June, determine the desired ending raw material inventory for June and work backwards. The budgeted purchases for June would be 424,550 pounds.

Explanation:

To calculate the budgeted purchases of raw materials for June, we need to determine the desired ending raw material inventory for June and work backwards. Given that Yummy Foods desires its ending raw material inventory to be 15% of the next month's production needs, we can calculate the production needs for June. Since each finished unit requires three pounds of raw materials, we can then calculate the total raw material needs for June. Finally, we subtract the beginning raw material inventory (55,000 pounds) from the total raw material needs to find the budgeted purchases of raw materials for June.

Here's the calculation:

June production needs = July production (139,000 units) * 15% + July production (139,000 units)
Total raw material needs for June = June production needs * 3 pounds per unit
Budgeted purchases for June = Total raw material needs for June - Beginning raw material inventory (55,000 pounds)

Plugging in the values:
June production needs = (139,000 * 15%) + 139,000 = 139,000 * 1.15 = 159,850 units
Total raw material needs for June = 159,850 * 3 = 479,550 pounds
Budgeted purchases for June = 479,550 - 55,000 = 424,550 pounds

Therefore, the budgeted purchases of raw materials for June would be 424,550 pounds, which is option d) 593,550 in pounds rounded to the nearest thousand.

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