Question

You prepare the direct materials purchase budgets for Clair Jams and Jellies. In June, the company plans to sell 134 cases of peach jam, each containing 14 jars of jam. Each jar of jam requires .70 pounds of peaches. Wastage and spoilage attributed to each jar is .25 pound and .30 pound, respectively. The standard price for each pound of peaches is $8.20. The company plans to have 80 pounds of peaches in inventory at the end of May and 200 pounds of peaches in inventory at the end of June. What will you report as the June direct materials purchase budget for peach jam?
A :
$20,213
B :
$18,204
C :
$18,245
D :
$14,760

Answer 1

Answer:

A: $20,213

Explanation:

Required Inventory at end of June = 200 pounds

Leftover inventory from May = 80 pounds

Jars sold in June = 134 cases x 14 jars/case = 1,876 jars

The total amount required for each jar is the sum of the amount per jar plus wastage and spoilage:

$R=0.70+0.30+0.25 = 1.25\ pounds/jar$

The total amount of pounds needed to be bought in June is the weight required for all the 1,876 jars, plus the required Inventory at end of June minus the leftover inventory from May:

$N=1.25*1,876 +200-80\\N=2,465\ pounds$

The reported amount for direct materials purchase budget (DM) for peach jam is given by:

$DM =2,465*\ 8.20\\DM=\ 20,213$