Alpha company makes units that each requires 2 pounds of material at $3 per poun

Question

Alpha company makes units that each requires 2 pounds of material at $3 per pound. Alpha is planning that 500 and 700 units will be built in May and June, respectively. Alpha keeps material on hand at 20% of the next month's production needs. Use this information to determine: (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)

            1. Raw Material Costs for May's Production

            2. Total Cost of May's Raw Materials Purchases

Explanation / Answer

Raw material cost for May's production = Number of units * Raw material required * Raw material cost per pound
= 500*2*$3
= $3000

Purchases to be made =
Material to be purchased + Closing inventory to be kept on hand
= 500*2* + 700*2*20%
= 1000+280
= 1280 units * $3
= $3840

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