There are a 140 pounds of flour in inventry on october 1. 1400 loaves are to be produced in october and 1500 loaves in november. flour costs $3 per pound and 1/2 pound is used per loaf. with the policy of 20% of next month's needs being in ending inventory, what is the budget for flour purchases in october

The budgeted floor purchases for October is 710 pounds and the cost of 710 pounds of flour is $2130

Explanation:

The flour needed to meet the October's production requirement for loaves is,

1400 * 1/2  =  700 pounds

The desired ending inventory of flour in October = 1500 * 1/2 * 0.2 = 150 pounds

The purchases for October should be enough to meet the desired ending inventory for October and the remaining Production requirement for October after adjusting for opening inventory .

Purchases = Closing Inventory + Production - Opening Inventory

Purchases = 150 + 700 - 140   =  710 pounds

The cost of purchases = 710 * 3  =  $2130

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