Question

Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 15 ounces of plastic costing $0.08 per ounce. Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows: Units July 3,500 August 4,400 September 4,900 October 6,300 Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 30% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy. Required: Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total. If required, round the total purchase cost to nearest whole value.

Answer 1

Answer:

Langer Company

Direct Materials Purchases Budget

For July, August and September

                                                             July August September Total

Units to be produced                        3500 4400 4900 12800

Direct materials per unit (ounces)             15 15 15 15

Production needs                                52500 66000 73500 192000

Desired ending inventory (ounces) 19800 22050 28350 28350

Total needs                                        72300 88050 101850 220350

Less: Beginning inventory                15750 19800 22050 15750

Direct materials to be purchased (ounces) 56550 68250 79800 204600

Cost per ounce                               $0.08 $0.08 $0.08 $0.08

Total purchase cost                     $4,524 $5,460 $6,384 $16,368