Answer:
Option $18,262
Explanation:
Data provided in the question:
Budgeted production units for July = 7,900
Budgeted production units for August = 8,100
Direct material required per unit = 2 ounces
safety stock of direct materials = 20% of the units budgeted in the following month
Direct material in inventory at the start of July = 3,160 ounce
Materials cost = $1.15 per ounce
Now,
Budgeted material required in July
= Budgeted production units for July × Direct material required per unit
= 7,900 × 2
= 15800 ounces
Budgeted material required in August
= Budgeted production units for August × Direct material required per unit
= 8,100 × 2
= 16,200 ounces
Direct materials requirement in July
= Budgeted material required in July + safety stock - Direct material in inventory at the start of July
= 15800 + (20% of 16,200 ) - 3,160
= 15800 + 3,240 - 3,160
= 15,880 ounces
Cost of direct material
= Direct materials requirement in July × Materials cost
= 15,880 ounces × $1.15 per ounce
= $18,262
Option $18,262
