Question

Direct co. determines that 48,000 pounds of direct materials are needed for production in may. there are 3,000 pounds of direct materials on hand at july 1 and the desired ending inventory is 1,800 pounds. if the cost per unit of direct materials is $2, what is the budgeted total cost of direct materials purchases? 98,400

Answer 1

Answer:

Budgeted total cost of direct material purchases

Production usage  ( In pound)                           48,000

Desired Closing Inventory                                1,800

                                                                          49,800

Opening Inventory                                           (3,000)

Material Purchases( In pound)                          46,800

Material Purchase cost($)                                93,600

Explanation:

Answer 2

Answer:

$93,600

Explanation:

Budgeted total cost is calculated by adding the ending inventory to the cost of goods sold , less the value of the opening  inventory.

Kindly note that since the production is for the month of may , the date for the opening inventory is May 1 and not July 1 as erroneously stated in the question.

Needed material (cost of goods sold )for may = 48000

Opening quantity at July 1 = 3000

Desired ending inventory = 1800

budgeted cost of material =

(48,000-3000) + 1800= 46800

Unit cost = $2

Total cost = $2 * 46800= $93,600