Smoke, Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic. Budgeted production of buckets in units for the next three months is as follows: April May June Budgeted production 21,000 22,000 24,000 The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is $2.20 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

Question

Business

Veronica Long

15 August, 01:36

Smoke, Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic. Budgeted production of buckets in units for the next three months is as follows: April May June Budgeted production 21,000 22,000 24,000 The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is $2.20 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

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Cooper Gonzalez · Answer 1

Total purchase = $24,750

Explanation:

Giving the following information:

Each bucket uses 1/2 pound of plastic.

Production:

May = 22,000

June = 24,000

The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs.

The cost of plastic is $2.20 per pound.

Direct material budget:

Sales for May = (22,000*0.5 pound * $2.2) = $24,200

Ending inventory = (24,000*0.5 pound * $2.2) * 0.25 = 6,600

Beginning inventory = (24,200*0.25) = (6,050)

Total = $24,750