Question

Quetzaltenango candle inc. budgeted production of 685,000 candles for March. Wax is required to produce a candle. Assume 8 ounces of wax is required for each candle. The estimated March 1 wax inventory is 15,000 pounds. The desired March 31 wax inventory is 14,500 pounds. If candle wax costs $1.20 per pound, determine the direct materials purchases budget for March. (One pound = 16 ounces.) For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Answer 1

To determine the direct materials purchases budget for March, we calculate the total wax needed for production, adjust for inventory, and then apply the cost per pound. This results in a budget of $410,400 for wax.

Step-by-step explanation:

To calculate the direct materials purchases budget for March for Quetzaltenango Candle Inc., the following steps are taken:

• First, determine the total amount of wax needed to produce the candles by multiplying the number of candles by the amount of wax per candle. This equates to 685,000 candles × 8 ounces each = 5,480,000 ounces needed for production.
• Convert ounces to pounds since wax inventory is measured in pounds. There are 16 ounces in a pound, so 5,480,000 ounces ÷ 16 ounces per pound = 342,500 pounds of wax needed for production.
• Next, we account for the desired end-of-month inventory by adding the March 31 inventory goal and subtracting the March 1 inventory. This yields 342,500 pounds + 14,500 pounds - 15,000 pounds = 342,000 pounds of wax to be purchased.
• Finally, multiplying the pounds of wax to be purchased by the cost per pound provides the budget for direct materials purchases. Therefore, 342,000 pounds × $1.20 per pound = $410,400 to be spent on wax.