Question

Pasadena Candle Inc. budgeted production of 715,000 candles for the January. Wax is required to produce a candle. Assume 10 ounces of wax is required for each candle. The estimated January 1 wax inventory is 18,600 pounds. The desired January 31 wax inventory is 12,800 pounds. If candle wax costs $2.10 per pound, determine the direct materials purchases budget for January. (One pound = 16 ounces.) Round all computed answers to the nearest whole number. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Answer 1

Answer:

Purchases Quantity = 441075 pounds

Purchases Value = $926257.5

Explanation:

To calculate the quantity and value of the purchases of direct material for the month of January, we first need to determine the quantity of direct material needed for production in January and adjust it with the opening inventory of direct material and the desired closing inventory.

To produce 715000 candles, the wax needed (in pounds) = 715000 * 10/16

To produce 715000 candles, the wax needed (in pounds) = 446875 pounds

The purchases for wax in pounds for January should be,

Consumption = Opening Inventory + Purchases - Closing Inventory

446875 = 18600 + Purchases - 12800

446875 + 12800 - 18600 = Purchases

Purchases = 441075 pounds

The value of Purchases will be = 441075 * 2.1  = $926257.5