Castil Corporation makes and sells a product called a Miniwarp. One Miniwarp req

Question

Castil Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.6 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:

August 19,800 units
September 20,600 units
October 20,500 units
November 21,100 units
December 20,800 units

The company wants to maintain monthly ending inventories of Jurislon equal to 25% of the following month's production needs. On July 31, this requirement was not met since only 9,600 kilograms of Jurislon were on hand. The cost of Jurislon is $5.5 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.


The total cost of Jurislon to be purchased in August is:
$293,150
$303,985
$366,437.5
$419,237.5


PLEASE SHOW WoRk

Explanation / Answer

Units Needed for August

Ending units for august is (20,600*.25) = 5150 units

Units Sold (kg) 19,800(2.6) = 51480 kg
(Less) Starting Inventory 9600 kg
Ending Invenrory (25% of next months sales) 5,150(2.6) = $13,390
Total material needed (kg) = 51480 - 9600 + 13390 = 55,270 kg

Total Cost = (55270 kg)($5.5/kg) = $303,985

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