Beridze Manufacturing expects to produce 2,000 units in January and 3,800 units

Question

Beridze Manufacturing expects to produce 2,000 units in January and 3,800 units in February. Beridze budgets $45 per unit for direct materials. The amount of indirect materials needed for production has been determined to be insignificant and will therefore not be considered in the calculation. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $38,550. Bendze desires the ending balance in Raw Materials Inventory to be 50% of the next month's direct materials needed for production. Desired ending balance for February is $50,300. What is the cost of budgeted purchases of direct materials needed for January? OA. $90,000 B. $175,500 C. $96,450 D. $136,950

Explanation / Answer

Beridze Manufacturing January Budgeted Production(unirts) 2000 Direct Material Cost $             45.00 Direct Material needed for Production(2000*$45) $     90,000.00 Add: Direct Material in Ending Inventory $     85,500.00 Total Direct Material needed($90000+$85500) $ 1,75,500.00 Less: Direct Material in Beginning Inventory(given) $     38,550.00 Ans(D) Budgeted Purchase of Raw Material $ 1,36,950.00 Direct Material in Ending Inventory=(3800*$45*50%) $     85,500.00

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