ABC Company makes and sells a single product. Each finished unit requires two po

Question

ABC Company makes and sells a single product. Each finished unit requires two pounds of direct materials. The budgeted units to be produced over the next three months is as follows: Budgeted Units to be Produced January 18,000 units February 19,000 units March 16,000 units The company wants to maintain monthlly ending inventories of direct materials equal to 20% of the following month's production needs. The cost of the direct materialss is $3.50 per pound. Assume ABC Company pays for 70% of a month's purchases of direct materials in the month of purchase and the other 30% is paid in the following month. Calculate the total cash budgeted to be paid in February for direct materials.

Explanation / Answer

on solving the above question the total cash budgeted to be paid in February for direct materials comes out to be equal to $145460

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