Can anyone explain to me how they have ended up with a figure of 19,500 for closing inventory?

Ash_Weston
Ash_Weston Registered Posts: 3
in Management Accounting: Budgeting
My understanding is that I would take the figure from period 2’s production budget, then x this by 5/20 and finally times it by 1.2 kg which would give me 18,720.

Comments

  • Krisso
    Krisso Registered Posts: 124 Dedicated contributor 🦉
    You have forgotten the 4% wastage so each unit uses 1.25kg of material, this will bring you back to 19500

    As you know there is 96% of the good material used take your 1.2 / 96 x 100 = 1.25 total material per unit
  • Ash_Weston
    Ash_Weston Registered Posts: 3
    Thank you! How careless of me.

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