Question

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 10.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August 23,400 units September 22,100 units October 23,500 units November 24,700 units December 24,400 units The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 11,600 kilograms of Jurislon were on hand. The cost of Jurislon is $26 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:

Answer 1

Answer:

The total cost of Jurislon to be purchased in August is: $7,293,260

Explanation:

We will calculate the kilograms needed to fulfil the sales and the desired ending inventory.

Then we will subtract the beginning balance, to know how many kilograms do we need to purchase for the requirement.

Last we multiply by the unit cost to get the cost in dollars

August 23,400 units x 10.5 =    245,700

ending 20% september

20% x 22,100 x 10.5 =                 46,410

Total requirement                       292,110

beginning                                    (11,600)

total purchase in kilograms 280,510

280,510 x $26 = $7,293,260 total cost for August