Direct Materials Purchases Budget Killings worth Publishers Inc. budgeted produc

Question

Direct Materials Purchases Budget Killings worth Publishers Inc. budgeted production of 60,000 diaries in 2016. Paper is required to produce a diary. Assume 88 square yards of paper arc required for each diary. The estimated January 1, 2016, paper inventory is 317,000 square yards. The desired December 31, 2016, paper inventory is 185,000 square yards. If paper costs $0.09 per square yard, determine the direct materials purchases budget for 2016. If required, round your final answer to the nearest dollar. $

Explanation / Answer

Opening stock + Purchases - Closing stock = Consumption.

Consumption = Budgeted production x Consumption per unit = 60,000 x 88 square yards = 5,280,000

So, 317,000 + Purchases - 185,000 = 5,280,000

So, Purchases = 5,148,000 square yards.

So, Purchase budget for 2016 = Purchase quantity x Cost per unit = 5,148,000 x $0.09 = $463,320

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