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

Question

XYZ 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

February 16,000 units

March 25,000 units

April 19,000 units

The company wants to maintain monthly ending inventories of direct materials equal to 30% of the following month's production needs. The cost of the direct materials is $2.50 per pound. Calculate the total cost of direct materials budgeted to be purchased in February. Do not use decimals in your answer.

Explanation / Answer

       93,500

Budgeted units to be produced        16,000 Direct meterial Required for production        32,000 Less: Beginning inventory           9,600 Add: Ending meterial inventory        15,000 Material to be purchased        37,400 rate per pound             2.50 Cost of material

       93,500

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