Question

Waterway Industries required production for June is 172000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 350000 and 380000 pounds, respectively. How many pounds of direct material Z must be purchased

Answer 1

Direct material purchase budget = 546,000 pounds

Step-by-step explanation:

Raw material purchase budget is determined by adjusting the raw material usage budget for opening and closing inventory of materials.

Purchase budget = usage budgeted + closing inventory - opening inventory

Usage budget = Production budget × standard materials per unit

= 172,000 × 3 pounds= 516,000

Purchase budget =516,000 + 380,000 - 350,000=546,000

Direct material purchase budget = 546,000 pounds