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Materials budget for production of 5,000 units; standard material per unit 3 kg; opening RM 2,000 kg; closing RM 3,000 kg. RM to purchase is:
A17,000 kg
B15,000 kg
C14,000 kg
D16,000 kg
Answer & Solution
Correct answer: D. 16,000 kg
1. Material required for production = 5,000 × 3 = 15,000 kg.
2. Add closing inventory required: 15,000 + 3,000 = 18,000 kg.
3. Less opening inventory: 18,000 − 2,000 = 16,000 kg.
4. Hence raw material to be purchased is 16,000 kg.
_Source: ICAI BoS Inter Paper 3, Ch 15 "Budget", §15.7.3 Illus 8_
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