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Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows: August 14,000 units September 14,500 units October 15,500 units November 12,600 units December 11,900 units The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year. The total cost of Material K to be purchased in August is:

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Answer:

The total cost of Material K to be purchased in August is $40,970

Explanation:

Direct Materials Budget

                                                            August             September

Production needs                             14,000 unit        14,500 unit

Raw materials in yards to make            3                           3

one unit

Total production requirements        42,000 unit      43,500 unit

Add ending inventory                       8700 units  

(43,500 * 20%)

Total needs                                       50,700 units

Lessl: Opening inventory                 2,500    

Total material requirement               48,200  

Cost of material per yard                  * 0.85    

Total cost of materials                      $40,970

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