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vagabundo [1.1K]
3 years ago
7

Bell expects to produce 1 comma 800 units in January and 2 comma 155 units in February. The company budgets 3 pounds per unit of

direct materials at a cost of $ 10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account​ (all direct​ materials) on January 1 is 4 comma 950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20​% of the next​ month's direct materials needed for production. Desired ending balance for February is 4 comma 860 pounds. Prepare Bell​'s direct materials budget for January and February.
Business
1 answer:
Debora [2.8K]3 years ago
3 0

Answer:

Instructions are below.

Explanation:

Giving the following information:

Production:

January= 1,800 units

February= 2,155 units

The company budgets 3 pounds per unit of direct materials at a cost of $ 10 per pound.

Beginning inventory= 4,950 pounds.

Desired ending inventory= 20​% of the next​ month's direct materials needed for production.

Desired ending balance for February is 4,860 pounds.

To calculate purchases, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

<u>January (in pounds):</u>

Production= 1,800*3= 5,400

Desired ending inventory= (2,155*3)*0.2= 1,293

Beginning inventory= (4,950)

Total= 1,743

Total cost= 1,743*10= $17,430

<u>February (in pounds):</u>

Production= 2,155*3= 6,465

Desired ending inventory= 4,860

Beginning inventory= (1,293)

Total= 10,032

Total cost= 10,032*10= $100,320

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