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25 August, 20:58

Alliance Company's budgets production of 25,000 units in January and 29,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $3.50 per pound. Each month's ending raw materials inventory should equal 40% of the following month's budgeted materials. The January 1 inventory for this material is 40,000 pounds. What is the budgeted materials cost for January?

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  1. 25 August, 21:22
    0
    Answer: $372400 ⇒ This is the budgeted materials cost for January.

    Explanation:

    Given that,

    Budgets production in January = 25,000 units

    Budgets production in February = 29,000 units

    Material required for production (in January):

    Each finished unit requires 4 pounds of raw material K that costs $3.50 per pound

    = 25000 * 4 * $3.50

    = 350,000

    Ending Material Balance:

    Budgeted material = 29000 * 4 * 3.50 = 406,000

    so,

    40% of following month's budgeted materials will be: 40% of 406,000

    = 162400

    Beginning Material Balance:

    = 40000 pounds * 3.50

    = 140,000

    ∴ Budgeted raw material = Material required for production + ending material balance - beginning material balance

    = 350000 + 162400 - 140,000

    = $372400 ⇒ This is the budgeted materials cost for January.
  2. 25 August, 23:39
    0
    The budgeted materials cost for January is 106,400 pounds

    Explanation:

    For computing the budgeted material cost for January month, the calculation is shown below:

    = Required production + ending raw material inventory - beginning raw material inventory

    where,

    Required production = January production units * required pounds

    = 25,000 units * 4

    = 100,000 pounds

    Ending raw material inventory = 40% of February month * required pound

    = 40% * 29,000 * 4

    = 46,400 pounds

    Now, put these values in the above formula

    So, budgeted material cost for January month is equals to

    = 100,000 pounds + 46,400 pounds - 40,000 pounds

    = 106,400 pounds

    Hence, the budgeted materials cost for January is 106,400 pounds
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