Question

Alliance Company’s budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month’s ending raw materials inventory should equal 40% of the following month’s budgeted materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted materials cost for January?

Answer 1

Answer:

Budgeted material cost for January is $ 256,000

Explanation:

Computations

Raw materials requirement for January

Units to be produced in January                                               24,000 units

Raw material requirement for January at 4 pounds per unit     96,000 pounds

Raw materials requirement for February

Units to be produced in February                                               28,000 units

Raw material requirement for February at 4 pounds per unit    112,000 pounds

40  % of requirement of February to be available end January  44,800 pounds

Purchases for January

Closing Inventory+ Consumption -Opening Inventory

44,800 pounds + 96,000 pounds  - 38,400 pounds =           102,400 pounds

Cost per pound  $ 2,50 per pound  = $ 256,000