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20 November, 01:20

Seranno Inc. budgeted production of 47,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 115 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 324,000 square yards. The desired December 31, 20Y6, paper inventory is 243,000 square yards. If paper costs $0.13 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar.

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  1. 20 November, 01:46
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    Purchases (yards) = 5,324,000 square yards

    Total cost = $692,120

    Explanation:

    Giving the following information:

    The number of units = 47,000

    Quantity required (unitary) = 115 square yards

    Beginning inventory = 324,000 square yards.

    Desired ending inventory = 243,000 square yards.

    Paper costs $0.13 per square yard.

    To calculate the purchase required, we need to use the following formula:

    Purchases (yards) = production + desired ending inventory - beginning inventory

    Purchases (yards) = 47,000*115 + 243,000 - 324,000

    Purchases (yards) = 5,324,000 square yards

    Now, the total cost:

    Total cost = 5,324,000*0.13 = $692,120
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