Question

Beridze Manufacturing expects to produce 2,600 units in January and 3,300 units in February. Beridze budgets $45 per unit for direct materials. The amount of indirect materials needed for production has been determined to be insignificant and will therefore not be considered in the calculation. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $38,450. Beridze desires the ending balance in Raw Materials Inventory to be 30% of the next month's direct materials needed for production. Desired ending balance for February is $51,800. What is the cost of budgeted purchases of direct materials needed for January? OA. $161,550 O B. $123,100 OC. $113,650 O D. $117,000

Answer 1

The cost of budgeted purchases of direct materials needed for January is $6,100.

Step-by-step explanation:

To calculate the cost of budgeted purchases of direct materials needed for January, we need to find the difference between the desired ending balance for February and the balance in the Raw Materials Inventory account on January 1.

First, we find the next month's direct materials needed for production, which is 3300 units multiplied by $45 per unit, giving us $148,500.

Then, we calculate 30% of the next month's direct materials needed for production, which is 0.30 multiplied by $148,500, equal to $44,550. Finally, we subtract the beginning balance in the Raw Materials Inventory account on January 1 ($38,450) from the desired ending balance for February ($51,800) to find the cost of budgeted purchases of direct materials needed for January, which is $44,550 - $38,450 = $6,100.