Jackson Inc. produces leather handbags. The production budget for the next four

Question

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,300 units, August 7,500 units, September 7,600 units, October 8,400 units. Each handbag requires 0.4 square meters of leather. Jackson Inc.'s leather inventory policy is 25% of next month's production needs. On July 1 leather inventory was expected to be 530 square meters. Leather is expected to cost $15.00 per square meter in June, but go up to $16.00 per square meter in July. What is the expected cost of leather purchases in July? O $38,340 O $38,440 O $35,940 O$37,440

Explanation / Answer

Expected production in July 5300 Square meters per unit 0.4 Square meters for production 2120 Add: Ending inventory 750 Total requirements 2870 Less: Beginning inventory 530 Square meters to be pruchased 2340 Cost per square meter 16 Cost of purchases 37440 Option 4 is correct

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