Beridze Manufacturing expects to produce 2,700 units in January and 3,600 units

Question

Beridze Manufacturing expects to produce 2,700 units in January and 3,600 units in February. Beridze budgets $35 per unit for direct materials. The amount of indirect materials needed for production has been determined to be insignificant and will therefore not be considered in the caloulation. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $37,450. Beridze desires the ending bala e in Raw Mat ials Inwtory to be 40% the next mont s dred materials needed for producton Desired ending balance for February is SS 600 What is the ost of budgeted purchases of direct materials needed for January? O A. $144,900 0 B. $94,860 C $94,500 D. $107 A50

Explanation / Answer

Budgeted units to be produced in January (A) 2700 Units Direct materials cost per unit (B) $ 35 Direct materials needed for production(C = AXB) $94,500 Desired direct materials in ending inventory (D) Details workings provided below) $50,400 Total direct materials needed (E = C+D) $1,44,900 Direct materials in beginning inventory (F) as given in the Problem $37,450 Budgeted purchases of direct materials (G = E-F) $1,07,450 WORKINGS Materials required in February = 3600 X $ 35 = 126000 As per the Problem given Raw Materials Inventory to be 40 % of the next month's direct materials needed for production Therefore Ending Inventory for January = 126000 X 40% = $ 50400 The Correct option is D) 107450

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