Asked by Cheyenne Doyen on May 01, 2024
Verified
Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 12,600 kilograms of Jurislon were on hand. The cost of Jurislon is $25 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.The total cost of Jurislon to be purchased in August is:
A) $2,757,500
B) $1,498,750
C) $1,813,750
D) $1,525,000
Direct Materials Purchase Budget
A financial plan that estimates the quantities and costs of direct materials to be purchased to meet production requirements.
Ending Inventories
Ending inventories refer to the final amount of goods available for sale or use at the end of an accounting period.
- Determine the overall expenses for materials by assessing the requirements of production and the price of materials per yard or kilogram.
Verified Answer
AS
Ahmad SobohMay 06, 2024
Final Answer :
B
Explanation :
To calculate the amount of Jurislon to be purchased in August:
Budgeted production for September = 30,000
Ending inventory for August = 30,000 x 20% = 6,000
Total Jurislon required = 30,000 + 6,000 = 36,000
Jurislon on hand on July 31 = 12,600
Jurislon to be purchased in August = 36,000 - 12,600 = 23,400
Cost of Jurislon per kilogram = $25
Total cost of Jurislon to be purchased in August = 23,400 x $25 = $585,000
Therefore, the answer is B. $1,498,750.
Budgeted production for September = 30,000
Ending inventory for August = 30,000 x 20% = 6,000
Total Jurislon required = 30,000 + 6,000 = 36,000
Jurislon on hand on July 31 = 12,600
Jurislon to be purchased in August = 36,000 - 12,600 = 23,400
Cost of Jurislon per kilogram = $25
Total cost of Jurislon to be purchased in August = 23,400 x $25 = $585,000
Therefore, the answer is B. $1,498,750.
Learning Objectives
- Determine the overall expenses for materials by assessing the requirements of production and the price of materials per yard or kilogram.
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