Question

Beridze Manufacturing expects to produce 2900 units in January and 3100 units in February. Beridze budgets $35 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 $37,550. Beridze desires the ending balance in Raw Materials Inventory to be 20% of the next month's direct materials needed for production. Desired ending balance for February is $50,400. What is the cost of budgeted purchases of direct materials needed for January

Answer 1

The cost of budgeted purchases of direct materials needed for January is $85,650

Step-by-step explanation:

Direct materials needed to produce in February = 3,100 x $35 = $108,500

Ending balance for February is $50,400

Ending Raw Materials Inventory balance for January = Beginning Raw Materials Inventory balance for February = 20% x $108,500 = $21,700

Direct materials needed to produce in January = 2,900 x $35 = $101,500

The cost of budgeted purchases of direct materials needed for January = Direct materials needed to produce in January + Ending Raw Materials Inventory balance for January - Beginning Raw Materials Inventory balance for January = $101,500 + $21,700 - $37,550 = $85,650