Question

Production estimates for July for Starling Co. are as follows: Estimated inventory (units), July 1 8,500 Desired inventory (units), July 31 10,500 Expected sales volume (units), July 76,000 For each unit produced, the direct materials requirements are as follows: Material A ($5 per lb.) 3.0 lbs. Material B ($18 per lb.) 0.5 lb. The total direct materials purchases of Materials A and B (assuming no beginning or ending materials inventory) required for July production is a.$1,080,000 for A; $1,296,000 for B b.$1,080,000 for A; $648,000 for B c.$1,170,000 for A; $702,000 for B d.$1,125,000 for A; $675,000 for B

Answer 1

Answer:

Material Purchase Budget:

Material A: $1,170,000

Material B:  $702,000

Explanation:

Material purchase budget = Material usage budget × standard price

Material usage budget = Production budget ×standard usage

Production budget = sales + closing inventory - opening inventory

  Production budget = 76,000 + 10,500 - 8,500= 78,000

Material purchase budget = Material usage budget × standard price

Material Purchase Budget:

Material A: 3 × 78,000  × $5= $1,170,000

Material B: 0.5 × 78,000 × $18= $702,000