eBook Calculator Langer Company produces plastic items, including plastic housin

Question

eBook Calculator Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 17 ounces of plastic costing $0.08 per ounce. Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows: Units 4,400 4,900 Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 30% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total. If required, round the total purchase cost to nearest whole value. Direct Materials Purchases Budget For July, August and September Total July 10-52 AM

Explanation / Answer

Langer Company

Direct Materials Purchase Budhet

For July, August and September

  

July August September Total Units to be produced (a) 3,500 4,400 4,900 12,800 Direct materials per unit(ounces) (b) 17 17 17 17 Production needs (c) = (a*b) 59,500 74,800 83,300 217,600 Desired ending inventory (d) 22,440 (74,800*30%) 24,990 (83,300*30%) 32,130 (6,300*17*30%) 32,130 Total needs (e) = (c+d) 81,940 99,790 115,430 249,730 Less : Beginning inventory (f) 17,850 (59,500*30%) 22,440 (74,800*30%) 24,990 (83,300*30%) 17,850 Direct materials to be purchased(ounces) (g) = (e-f) 64,090 77,350 90,440 231,880 Cost per ounce(h) 0.08 0.08 0.08 0.08 Total purchase cost (i) = (g*h) 5,127.2 6,188 7,235.2 18,550.4

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