Stephanie Corporation sells a single product. Budgeted sales for the year are an

Question

Stephanie Corporation sells a single product. Budgeted sales for the year are anticipated to be 630,000 units, estimated beginning inventory is 105,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below Material A 0.50 lb. per unit @ $0.72 per pound Material B 1.00 lb. per unit@ $1.80 per pound Material C 1.20 lb. per unit @ $0.81 per pound The dollar amount of material A used in production during the year is $217,800 $1,089,000 $588,060 $226,800

Explanation / Answer

Answer

No. of units to be produced = Budgeted Sales + Closing Inventory – Opening Inventory

= 630,000 Units + 80,000 Units – 105,000 Units

No. of units to be produced = 605,000 Units

Dollar amount of Material A = No. of Units to be produced * 0.50 lb. per unit * $0.72 per pound

= 605,000 Units * 0.50 * $0.72

Dollar amount of Material A = $217,800

Answer = $217,800

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