Springer, Inc. produces rulers from plastic resin. On March 1, there are 5,000 completed rulers and 5,200 kilograms of resin on hand. Flyer has estimated production and sales of rulers in units for the next 4 months as:
March |
April |
May |
June |
|
Estimated production |
26,000 |
22,000 |
30,000 |
32,000 |
Estimated sales |
25,000 |
21,000 |
33,000 |
24,000 |
Each ruler requires 0.25 kilograms of resin. The cost of resin is $4.40 per kilogram. Flyer wants to have 20% of the next month’s material requirements on hand at the end of each month. Prepare a direct materials purchases budget for May.
Direct material purchase budget for May
Estimated production = 30,000 units
Resin per unit = 0.25 kg
Resin required for production = 7,500 kg
Add: desired ending inventory = 32,000*0.25*20% = 1600 kg
Total required = 9100 kg
Less: beginning inventory = 7500*20% = 1500 kg
Required purchases = 7600 kgs
Cost per kg =$4.40
Budgeted cost =$33,440
Springer, Inc. produces rulers from plastic resin. On March 1, there are 5,000 completed rulers and...
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