Exercise 23-7 Rensing Ltd. estimates sales for the second quarter of 2017 will b
ID: 2508198 • Letter: E
Question
Exercise 23-7
Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.
Month
Units
The target ending inventory of finished products is as follows.
2 units of material are required for each unit of finished product. Production for July is estimated at 2,800 units to start building inventory for the fall sales period. Rensing’s policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month’s production requirements.
Raw materials are expected to cost $7 per unit throughout the period.
Calculate the May raw materials purchases in dollars.
Month
Units
April 2,560 May 2,420 June 2,340Explanation / Answer
Raw material purchases cost for May: $34020
Working:
Direct Materials Budget April May June July Budgeted production (units) 2720 2420 2440 2800 Material needed per unit (lbs.) 2 2 2 2 Materials needed for production (lbs.) 5440 4840 4880 5600 Desired ending inventory of materials 2420 2440 2800 Total materials requirements (lbs.) 7860 7280 7680 Less beginning inventory of materials 2720 2420 2440 Materials to be purchased (lbs.) 5140 4860 5240 Materials price per pound $ 7.00 $ 7.00 $ 7.00 Budgeted cost of direct materials purchases $ $ 35,980 $ 34,020 $ 36,680Related Questions
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