Brief Exercise 159 Wynn, Inc. manufactures beanies. The budgeted units to be pro

Question

Brief Exercise 159

Wynn, Inc. manufactures beanies. The budgeted units to be produced and sold are below:

It takes 18 yards of yarn to produce a beanie. The company's policy is to maintain yarn at the end of each month equal to 5% of next month's production needs and to maintain a finished goods inventory at the end of each month equal to 20% of next month's anticipated production needs. The cost of yarn is $0.20 a yard. At August 1, 3,150 yards of yarn were on hand.

Compute the budgeted cost of purchases.

Explanation / Answer

Units to be produced 3,500 Yards needed per unit 18 Yards needed for production 63,000 Add: Desired materials ending inventory (yards) (5% × 2,800 × 18) 2,520 Less: Beginning inventory on hand (yards) (5% × 3,500 × 18) (3,150) Yards needed to purchase 62,370 Cost per yard $0.20 Budgeted cost of purchases $12,474

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