Answer:
Total cost= $201,700
Explanation:
Giving the following information:
Budgeted production:
May= 5,000
June= 4,400
Each unit requires 3 pounds of materials at a cost of $10 per pound.
Beginning inventory May= 2,750 pounds
he company desires an ending inventory of 60% of the next month's materials requirements.
The total direct material purchase is determined by the sales budgeted, the desired ending inventory, and the beginning inventory:
Direct material required (pounds)
Production= (3*5,000)= 15,000 pounds
Desired ending inventory= (3*4,400)*0.60= 7,920 pounds
Beginning inventory= (2,750)
Total pounds= 20,170 pounds
Now, we can calculate the total cost:
Total cost= 20,170*10= $201,700
Answer: $201,700
Explanation:
Given the following;
Budgeted Units of production :
May = 5,000 units
June = 4,400 units
Required pound/unit of product = 3
Cost per pound = $10
Calculating cost of direct material purchase for the month of May ;
Starting with the required pound(lbs) of material for MAY :
Pound for Budgeted unit = Budgeted unit × pound per unit
= 5000 × 3 = 15,000 pounds
Ending inventory = 60% of Budgeted material for JUNE :
0.6 × 4400 = 2640 units
Budgeted unit × pound per unit
2640 × 3 = 7920 pounds
Deduct beginning inventory (2750)
Total pounds of material for MAY production :
15,000 + 7,920 - 2750 = 20,170 pounds
Therefore, cost of total direct material purchases =
Total pound of materials needed × cost per pound
20,170 × $10 =$201, 700
