Teller Co. is planning to sell 900 boxes of ceramic tile, with production estima

Question

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.

What is the total amount to be budgeted in pounds for direct materials to be purchased for the month?

A) 38,280

B) 37,680

C) 38,880

D) 40,200

Explanation / Answer

Direct materials to be purchased = (Budgeted Production*No of raw material per unit) + ending inventory - beginning inventory

Direct materials to be purchased = (870*44) + 4500-3900

Direct materials to be purchased = 38,880

Answer

C) 38,880

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