Question

Alpha company makes units that each requires 2 pounds of material at $3 per pound. Alpha is planning that 500 and 700 units will be built in May and June, respectively. Alpha keeps material on hand at 20% of the next month's production needs. Use this information to determine: (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units) 1. Raw Material Costs for May's Production 2. Total Cost of May's Raw Materials Purchases

Answer 1

The correct answer for 1. is $3,000 and for 2. $3,240.

Step-by-step explanation:

1).

Total cost of raw material for may production = Raw material unit × Required pound × Raw material price per pound

= 500 × 2 pounds × $3 per pound

= $3,000

2).

Particular April May June

Units of Raw Material 500 700

Required Pound 2 2

Need of Raw Material (Units × pounds) 1,000 1,400

Add. Ending Inventory Desired 200 280

Total of Required Raw Material (1,000+280) 1,280

Less- April ending Raw Material 200

Purchase Raw Material ( 1,280 - 200) 1,080

Per Pound Price of Raw Material $3

Total cost of Purchased Raw Material (1080 × 3) $3,240

Note : Ending inventory for April = 1,000 × 20 % = 200

Ending inventory for May = 1,400 × 20% = 280