Woodsman Inc. produces a variety of wood finishing products including gallons of

Question

Woodsman Inc. produces a variety of wood finishing products including gallons of varnish that it manufactures and packages under its own name. The company has computed the required production of gallons of varnish it will need for the first three months of 2009 as follows: January 300,000 gallons February 340,000 gallons March 400,000 gallons Each gallon of varnish requires 10 ounces of a special chemical. This chemical costs $.25 per ounce. The company has determined that it needs 20 percent of next month's raw material needs on hand at the end of each month. The cost of the direct material that should be purchased in February is: Answer $920,000 $950,000 $880,000 $850,000

Explanation / Answer

Please ignore my previous answer. Its incomplete =340000*10*.25 = 850000 Opening Inventory = 340000*10*.25*.20 = 170000 Closing Inventory = 400000*10*.25*.20 = 200000 Purchases = 850000 + 200000 - 170000 = 880000 Thanks.

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