Prepare a materials-purchases budget
Calculate quantities and costs to purchase by allowing for production needs and inventory policy.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. Topic 4.3 covers budgetary control, linked master-budget schedules, spreadsheets, limiting factors, flexible budgets, reconciliations, behavioural effects and supported decisions. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use AS Topics 2.1–2.2 for cost behaviour, contribution and budgeting foundations. For each schedule, label the period, units, price, inventory policy, timing assumptions and opening balance before calculating.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
If production uses 2 kg per unit for 300 units, how much material is required for production?
What you will learn
- Calculate materials required for production
- Adjust for opening and closing materials inventory
- Calculate purchase cost and link payment timing separately
Find the purchase quantity
Materials purchases quantity = materials required for budgeted production + desired closing materials inventory − opening materials inventory. Materials needed for production = budgeted output × standard material per unit.
Calculate each material separately when products use different inputs. Keep the purchase quantity distinct from the amount consumed: inventory changes make the two different.
Cost the purchases and plan cash separately
Purchase cost = purchase quantity × budgeted price per unit of material. If suppliers give a discount, use the price assumption stated and retain the unit labels.
The purchases schedule feeds inventory and cost-of-production plans. Cash paid may occur later under supplier credit terms, so a trade-payables or cash budget must use payment timing rather than simply copying the purchase total into the same period's payments.
Pause and explain
Production needs 1,800 kg; opening stock is 250; desired closing stock 300. How much should be bought?
Worked example
Production needs 5,000 kg of material. Opening stock is 700 kg, desired closing stock is 900 kg and price is $4/kg. Calculate purchase quantity and cost.
Show the worked solution
- Purchases quantity = 5,000 + 900 − 700 = 5,200 kg.
- Multiply by $4 per kg.
- 5,200 × $4 = $20,800.
Answer Purchase 5,200 kg at a budget cost of $20,800.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Output requires 3,600 metres. Opening stock is 500 metres and desired closing stock is 450. Price is $2.40 per metre. Calculate purchase cost.
Give me a hint
Find the required purchase quantity before multiplying by price.
Compare my reasoning
- Purchases = 3,600 + 450 − 500 = 3,550 metres.
- Cost = 3,550 × $2.40.
- Cost = $8,520.
Purchase budget is 3,550 metres costing $8,520.
Look for these in your work
- Inventory adjustment correct
- Purchase quantity correct
- Price applied correctly
Production is 2,400 units and each unit uses 1.5 kg. Opening material stock is 400 kg, target closing stock 520 kg, and price $6/kg. Calculate purchase quantity and cost.
Give me a hint
Calculate production usage first.
Compare my reasoning
- Production requirement = 2,400 × 1.5 = 3,600 kg.
- Purchases = 3,600 + 520 − 400 = 3,720 kg.
- Cost = 3,720 × $6 = $22,320.
Purchase 3,720 kg for $22,320.
Look for these in your work
- Production requirement correct
- Inventory adjustment correct
- Purchase cost correct
A supplier offers a lower unit price if the business doubles its order size. What should be compared before accepting?
Give me a hint
Consider the purchase saving and the inventory and cash costs of buying extra.
Compare my reasoning
- Calculate the price saving on the additional units.
- Estimate storage, insurance, handling, spoilage and cash/credit costs while stock is held.
- Check demand, supplier reliability, quality and whether the bulk quantity exceeds useful inventory needs.
Compare the discount with holding and financing costs, quality and demand risk. A lower purchase price may not reduce total relevant cost.
Look for these in your work
- Discount quantified
- Inventory costs included
- Demand/quality risk evaluated
Common mistakes
- Using sales units instead of production units
- Calling material consumed the purchase quantity
- Treating purchases as same-period cash payments
What can you explain now?
How do you find materials to purchase?
Compare with the explanation
Production requirement + closing stock − opening stock
Purchases must cover production and the planned closing stock after using opening materials.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Why does the materials-purchases budget differ from material usage and from cash paid?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.