Direct Materials Purchases Budget Marshall Inc. budgeted production of 50,000 pe

Question

Direct Materials Purchases Budget

Marshall Inc. budgeted production of 50,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 109 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 273,000 square yards. The desired December 31, 20Y6, paper inventory is 245,000 square yards.

If paper costs $0.13 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar.

Explanation / Answer

Determine direct material budget for 2016

Production 50000 Paper per journal 109 Paper needed for production 5450000 Add: Desired ending inventory of paper 245000 Total 5695000 Less: Beginning inventory of paper -273000 Purchase 5422000 Cost per square yard 0.13 Direct material purchase cost 704860

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