Problem:
RS Ltd is currently preparing the production budget for Product A and the material purchase budget for material X for the forthcoming year. Each unit of Product A requires 5 kgs of material X.
The anticipated opening stock for Product A is 5,000 units and the company wishes to increase the closing stock by 30% by the end of the year.
The anticipated opening stock for material X is 50,000 kgs and in order to avoid stock-outs the required closing stock has been increased to 60,000 kgs.
The Sales Director has confirmed a sales requirement of 70,000 units of Product A.
How many units of Product A will need to be produced?
What will be the purchases budget for material X?