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4 February, 19:12

Alliance Company's budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 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 38,400 pounds. What is the budgeted materials cost for January?

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  1. 4 February, 19:29
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    Budgeted material cost for January is $ 256,000

    Explanation:

    Computations

    Raw materials requirement for January

    Units to be produced in January 24,000 units

    Raw material requirement for January at 4 pounds per unit 96,000 pounds

    Raw materials requirement for February

    Units to be produced in February 28,000 units

    Raw material requirement for February at 4 pounds per unit 112,000 pounds

    40 % of requirement of February to be available end January 44,800 pounds

    Purchases for January

    Closing Inventory + Consumption - Opening Inventory

    44,800 pounds + 96,000 pounds - 38,400 pounds = 102,400 pounds

    Cost per pound $ 2,50 per pound = $ 256,000
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