Question

Morganton Company makes one product:The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,500, 16,000, 18,000, and 19,000 units what is the estimated cost of raw materials purchases for July?

Answer 1

Missing information:

"The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound."

raw materials needs for July:

Units produced 16,000 x 4 = 64,000 pounds

ending inventory (18,000 x 4) x 10% = 7,200 pounds

- beginning inventory (16,000 x 4) x 10% = 6,400 pounds

total raw materials purchases 64,800 pounds

cost of raw materials for July = 64,800 x $2.50 = $162,000