Legalos Company makes and sells a single product. It takes seven pounds of direc

Question

 Legalos Company makes and sells a single product. It takes seven pounds of direct materials to produce one unit of this product. Budgeted production for the next three months is given below:                    Budgeted Units to be Produced             February                  18,500 units March                     19,200 units April                     14,300 units  The company wants to maintain monthly ending inventories of direct materials that are equal to 45% of the following month's production needs. The cost of direct materials is $1.60 per pound.  Calculate the total cost of direct materials budgeted to be purchased in February.

Explanation / Answer

Ans. Total cost of direct materials budgeted to be purchased in february         210728. Particulars February Production needs 129500 Add: Desired ending inventory 60480 Total needs 189980 Less: Beginning inventory -58275 Raw materials to be purcahsed 131705 Cost of raw materials purchased 210728 Cost of raw materials purchased = Raw materials to be purchased * cost per pound 131705 * 1.60 210728 Production needs    =   Units to be produced * raw material needs per unit Feb. 18500 * 7 129500 March 19200 * 7 134400 Desired ending inventory (february) = 45% of March production needs 134400 * 45% 60480 Beginning inventory (feb.) = Ending inventory of previous month (jan.) *Ending inventory of january = 45% of february production needs 129500 * 45% 58275

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