Dustman Manufacturing Corporation\'s most recent production budget indicates the
ID: 2578111 • Letter: D
Question
Dustman Manufacturing Corporation's most recent production budget indicates the following required production:
Each unit of finished product requires 3 feet of raw materials. The company maintains raw materials inventory equal to 2,000 feet plus 10% of the next month's expected production needs. The raw material used in Dustman Manufacturing Corporation's product costs $4.50 per foot. What is the value of raw material that Dustman Manufacturing should plan on purchasing for the month of February?
Multiple Choice
$73,575
$74,250
$81,000
$80,325
January February March April Required production (units) 4,000 6,000 5,500 5,000Explanation / Answer
Correct option is $80,325
Explanation:
Raw material required for Februaryproduction(6000 units×3feet)=18,000 feet
Add desired ending inventory of raw material{2000+10%(5500×3)}=3650 feet
Total required=21,650 feet
Less beginning raw material inventory {2000+10%(6000×3)}=3800 feet
Required raw material purchase=17850 feet
Rate per feet=×$4.50
Value of raw material to purchase=$80,325
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