XYZ Company makes and sells a single product. Each finished unit requires three
ID: 2404967 • Letter: X
Question
XYZ Company makes and sells a single product. Each finished unit requires three pounds of direct materials.
The budgeted units to be produced over the next four months is as follows: Budgeted Units to be Produced January 18,000 units February 19,000 units March 24,000 units April 17,000 units
The company wants to maintain monthly ending inventories of direct materials equal to 25% of the following month's production needs. The cost of the direct materials is $3.20 per pound. Calculate the total cost of direct materials budgeted to be purchased in March.
Explanation / Answer
March April Units to be produced 24000 17000 Raw material needs per unit 3 3 Production needs 72000 51000 Add: Desired ending inventory 12750 (51000*20%) Total needs 84750 Less: beginning inventory 18000 (72000*20%) Raw materials to be purchased 66750 Cost per pound 3.2 Cost of raw materials purchased 213600 Total cost of direct materials budgeted to be purchased in March $213600
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