Norton Manufacturing expects to produce 2,900 units in January and 3,600 units in February. Norton budgets $20 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the raw materials inventory account (all direct materials) on January 1 is $38,650. Norton desires the ending balance in raw materials inventory to be 10% of the next month's direct materials needed for production. Desired ending balance for February is $51,100. What is the cost of budgeted purchases of direct materials needed for January

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Business

Xzavier

19 September, 01:02

Norton Manufacturing expects to produce 2,900 units in January and 3,600 units in February. Norton budgets $20 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the raw materials inventory account (all direct materials) on January 1 is $38,650. Norton desires the ending balance in raw materials inventory to be 10% of the next month's direct materials needed for production. Desired ending balance for February is $51,100. What is the cost of budgeted purchases of direct materials needed for January

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Gretel · Answer 1

Purchases = $26,550

Explanation:

Giving the following information:

Production:

January = 2,900 units

February = 3,600 units

Norton budgets $20 per unit for direct materials.

Beginning inventory raw materials = $38,650.

Desired ending inventory direct materials = 10% of the next month's direct materials needed for production.

To calculate the purchases of direct material, we need to use the following formula:

Purchases = production + desired ending inventory - beginning inventory

Purchases = 2,900*20 + (3,600*0.1) * 20 - 38,650

Purchases = $26,550