Question

Alpha company makes units that each requires 2 pounds of material at $3 per pound. Alpha is planning that 500 and 700 units will be built in May and June, respectively. Alpha keeps material on hand at 20% of the next month's production needs. Use this information to determine: (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units) 1. Raw Material Costs for May's Production 2. Total Cost of May's Raw Materials Purchases

Answer 1

Answer:

The correct answer for 1. is  $3,000 and for 2. $3,240.

Explanation:

1).

Total cost of raw material for may production = Raw material unit × Required pound × Raw material price per pound

= 500 × 2 pounds × $3 per pound

= $3,000

2).

Particular                                 April               May           June

Units of Raw Material                                         500        700

Required Pound                                                  2             2  

Need of Raw Material (Units × pounds)                      1,000     1,400

Add. Ending Inventory Desired   200                 280  

Total of Required Raw Material (1,000+280)              1,280  

Less- April ending Raw Material                      200  

Purchase Raw Material ( 1,280 - 200)                         1,080  

Per Pound Price of Raw Material                         $3  

Total cost of Purchased Raw Material (1080 × 3)   $3,240  

Note : Ending inventory for April = 1,000 × 20 % = 200

Ending inventory for May = 1,400 × 20% = 280