Question

Cashan Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 1.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August 24,500 units September 24,700 units October 24,600 units November 26,400 units December 24,500 units

The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $4.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.
The desired ending inventory of Jurislon for September is:_______.
a. $29,640
b. $29,520
c. $44,460
d. $44,280

Answer 1

Option d ($44,280) is the correct option.

Step-by-step explanation:

Given:

Maintain monthly inventory,

= 30%

October production,

= 24,600 units

Rate per kg,

= $4

For September month,

The desired ending units will be:

=
`Maintain \ monthly \ inventory* Production \ in \ October`

=
`30 \ percent* 24600`

=
`7380 \ units`

The required quantity will be:

=
`1.5 \ kg* Desired \ ending \ units`

=
`1.5 \ kg* 7380`

=
`11070 \ units`

hence,

The total price will be:

=
`Rate \ per \ kg* Required \ quantity`

=
`4* 11070`

=
`44280` ($)