Soster makes and sells candles. Each candle uses 1/2 pound of wax. Budgeted prod

Question

Soster makes and sells candles. Each candle uses 1/2 pound of wax. Budgeted production of candles in units for the next five months is as follows: March 16,000 units, April 12,000 units, May 14,500 units, June 13,900 units, July 15,500 units. The company wants to mantain monthly ending inventories of wax equal to 30% of the following months budgeted production needs. There were 1,800 pounds of wax on hand on March 31 and 1,000 pounds at March 1. The cost of wax is $.80 per pound. Soster pays 40% of merchandise purchases in the month purchased and 60% inthe following month . Prepare a direct materials purchases budet for April. Determine how much cash will be paid for purchases during April.

Explanation / Answer

cash paid for purchase= (7040 *.60 ) +(5100 *.40)

                                = 4224 + 2040

                               = $ 6264

march April Budgeted production   8000    [16000*1/2] 6000      (12000 *1/2] Ending inventory desired 1800 2175       [14500 *1/2 = 7250 *.30 = 2175] less:Beginning Inventory (1000) (1800)      [6000 *.30 ] Purhcase of raw material 8800 6375 per pound cost .8 .8 purchase cost 7040 5100

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