To calculate the budgeted cost of direct material B during May, we need to determine the production needs for May and then calculate 30% of that amount for the Raw Materials Inventory.
To calculate the budgeted cost of direct material B during May, we need to determine the production needs for May and then calculate 30% of that amount for the Raw Materials Inventory. Then we can multiply the Raw Materials Inventory by the cost per pound of direct material B to find the budgeted cost.
Step 1: Calculate the production needs for May by multiplying the May sales forecast by 1.4 (40% increase). May production needs = 400 * 1.4 = 560 units.
Step 2: Calculate the Raw Materials Inventory for May by multiplying the May production needs by 0.3 (30%). May Raw Materials Inventory = 560 * 0.3 = 168 pounds.
Step 3: Multiply the Raw Materials Inventory by the cost per pound of direct material B to find the budgeted cost. Budgeted cost = 168 * $2.00 = $336.
Complete Question :
Cahuilla Corporation predicts the following sales in units for the coming four months:
April May June July
Sales in Units 360 400 420 360
Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 Finished Goods inventory is 144 units. A finished unit requires 5 pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 210 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted cost of direct material B during May should be: