Question

Jordan Company makes and sells a single product. It takes five pounds
of direct materials to produce one unit of this product. The budgeted
units to be produced for the next four months is given below:

                  Budgeted Units to be Produced            
September                 31,900 units
October                   22,400 units
November                  26,100 units
December                  34,600 units

Jordan Company wants to maintain monthly ending inventories of direct
materials that are equal to 24% of the following month's production
needs. The cost of direct materials is $2.75 per pound.

Assume Jordan Company pays for 40% of a month's purchase of direct
materials in the month of purchase and the other 60% is paid in the
following month.

Calculate the amount of budgeted cash payments for direct materials
in October.

Answer 1

A 1 2 Required production in units of finished goods 3 Units of direct materials needed per unit of finished goods 4 Units of direct materials needed to meet production 5 Add: desired units of ending direct materials inventory 6 Total units of direct materials needed 7 Less: Units of beginning direct materials inventory 8 Units of direct materials to be purchased 9 Unit cost of direct materials 10 Total Cost of direct materials to be purchased in April B November 26100 4 104400 33216 34600*4*24% 137616 25056 104400*24% 112560 2.75 309540