Question

Northwest manufactures a product requiring 0.5 ounces of platinum per unit The cost of platinum Is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget Planned production in units July 1,000 August 1,100 September 980 The cost of platinum to be purchased to support August production is:

Answer 1

The cost of platinum to be purchased to support August production is $195,840

Step-by-step explanation:

The computation is shown below:

= August production units - July production units based on august × 10% + September production units × 10%

= 1,100 - 1,100 × 10% + 980 × 10%

= 1,100 - 110 + 98

= 1,088 units

Now the required platinum would be = $1,088 × 0.5 = 544 ounces

And, the cost of per ounces is $360

So, the total cost of platinum would be

= 544 ounces × $360

= $195,840