Question

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 7.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:
August 23,100 units
September 21,800 units
October 23,200 units
November 24,400 units
December 24,100 units
The company wants to maintain monthly ending inventories of Juris!on equal to 25% of the following month's production needs. On July 31, this requirement was not met since only 11,300 kilograms of Jurislon were on hand. The cost of Jurision is $23 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.
Required:
a. The total cost of Jurislon to be purchased in August is ____________.

Answer 1

Answer:

Total cost for August= $4,647,725

Explanation:

Giving the following information:

One Miniwarp requires 7.5 kilograms of the raw material Jurislon.

Budgeted production:

August= 23,100 units

September= 21,800 units

The company wants to maintain monthly ending inventories of Juris!on equal to 25% of the following month's production needs.

Beginning inventory in kilograms= 11,300.

The cost of Jurision is $23 per kilogram.

First, we need to determine the total kg needed for production:

Direct material budget (kg):

Sales= 23,000*7.5= 172,500

Desired ending inventory= (21,800*7.5)*0.25= 40,875

Beginning inventory= (11,300)

Total kilograms= 202,075

Total cost for August= 202,075*23= $4,647,725