Question

Coles Company, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:August 14,000 unitsSeptember 14,500 unitsOctober 15,500 unitsNovember 12,600 unitsDecember 11,900 unitsThe company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement wasn't met because only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.The total cost of Material K to be purchased in August isA. $33,840.B. $48,200.C. $42,300.D. $40,970.

Answer 1

$40,970

Step-by-step explanation:

The computation of the total cost of material purchased in August month is shown below:

Material to be purchased (yards) = (Units required for manufacturing × number of yards needed + September inventory units × number of yards needed × percentage given - opening inventory in yards) × cost per yard

= (14,000 units × 3 yards + 14,500 yards × 3 × 20% - 2,500 yards) × $0.85

= (42,000 yards + 8,700 yards - 2,500 yards) × $0.85

= 48,200 yards × $0.85

= $40,970