Question

The following information is from the manufacturing budget and budgeted financial statements of Altman Corp.

Direct materials inventory, 1/1 $ 86,000
Direct materials inventory, 12/31 $ 102,000
Direct materials budgeted for use during year $ 344.000
Accounts payable to suppliers, 1/1 $ 54,000
Accounts payable to suppliers, 12/31 $ 64.000
Required:
1. For the year, budgeted purchases of direct materials amounted to _________.
A. $360,000.
B. $344,000.
C. $370,000.
D. $328,000.

Answer 1

A. $360,000

Step-by-step explanation:

Data provided

Direct materials inventory, 1/1 = $86,000

Direct materials inventory, 12/31 = $102,000

Direct materials budgeted for use during year = $344,000

The computation of budgeted purchases is shown below:-

Material used during the period = Opening stock + Purchases - Ending inventory

Required purchases = $344,000 + $102,000 - $86,000

= $446,000 - $86,000

= $360,000

Therefore for computing the budgeted purchases we simply applied the above formula.