Question

Production estimates for August are as follows:Estimated inventory (units), August 1 12,000Desired inventory (units), August 31 9,000Expected Sales volume (units), August 75,000For each unit produced, the direct materials requirement are as follows:Direct Material A ($5 per lb) 3 lbsDirect Material B ($18 per lb) 1/2 lbThe number of pounds of matierials A and B required for August production are? The total direct materials purchases (assuming no beginning or ending inventory of material) of materials A and B required for August production are?

Answer 1

Answer:

(1) (i) Material A required = 216,000

   (ii)  Material B required = 36,000

(2) (i) $1,080,000

   (ii) $648,000

Explanation:

(a) Production units = Sales + Closing Stock – Opening Stock

                                 = 75,000 + 9,000 – 12,000

                                 = 72,000 units

Material A required = Production units × Direct Material

                                = 72,000 × 3

                                = 216,000

Material B required  = Production units × Direct Material

                                 = 72,000 × 0.50

                                 = 36,000

(b) Material A cost = Material A required × Cost per lb

                              = 216,000 × $5

                              = $1,080,000

Material B cost = Material A required × Cost per lb

                         = 36,000 × 18

                         = $648,000