Question

Alliance Company’s budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month’s ending raw materials inventory should equal 40% of the following month’s budgeted materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted materials cost for January?

Answer 1

Budgeted material cost for January is $ 256,000

Step-by-step explanation:

Computations

Raw materials requirement for January

Units to be produced in January 24,000 units

Raw material requirement for January at 4 pounds per unit 96,000 pounds

Raw materials requirement for February

Units to be produced in February 28,000 units

Raw material requirement for February at 4 pounds per unit 112,000 pounds

40 % of requirement of February to be available end January 44,800 pounds

Purchases for January

Closing Inventory+ Consumption -Opening Inventory

44,800 pounds + 96,000 pounds - 38,400 pounds = 102,400 pounds

Cost per pound $ 2,50 per pound = $ 256,000