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

Since 9600 kg is already in hand on July 31 Amount required for aug =19800*2.6 = 51840 kg but since 9600 is already their amount need to be bought = 51840-9600 = 41880 kg 41880 kg will be required for august and 0.25*20600*2.6 =13390 kg to satisfy 25 % criteria for next month Total required = (41880+13390) = 55270 kg cost = 55270*5.5=303985 Hope this helps

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