Question

Pied Paper Corporation manufacturers safety whistle keychains. They have the following information available to prepare their master budget:

? Units to be produced
October 4,500
November 4,750
December 5,200

Pied Piper Corporation sells each whistle for $12. It takes 3 ounces of metal to produce each whistle and metal costs $0.50 per ounce. They want to have ending inventory equal to 10% of direct materials required for the following month's production. What is the total cost of direct material purchases for October?

Answer 1

Answer:

The total cost of direct material purchases for October is $6,788

Explanation:

For computing the total cost, first, we have to find the production cost which is shown  below:

= October units + November or ending units × percentage given - October or beginning units  × percentage given

= 4,500 units + 4,750 units × 10% - 4,500 units × 10 units

= 4,500 units + 475 units - 450 units

= 4,525 units

Now the total cost of material would be

= Production units × number of ounces × price per ounces

= 4,525 units × 3 ounces × $0.50

= $6,788