Question

Question 6 4.5 pts Jordan Company makes and sells a single prod uct. It takes five pounds of direct materials to produce one unit of t his product. The budgeted units to be produced for the next four month s is given below: Budgeted Units to be Produ ced September October November December 31,900 units 22,400 units 26, 100 units 34,600 units Jordan Company wants to maintain monthly end ing inventories of direct materials that are equal to 24% of the follo wing month's production needs. The cost of direct materials is $2.75 per pound. Assume Jordan Company pays for 40% of a mont h's purchase of direct materials in the month of purchase and the o ther 60% is paid in the following month. Calculate the amount of budgeted cash paymen ts for direct materials in October.

Answer 1

Direct Material Purchases
	September	October	November
Budgeted units to be produced	31900	22400	26100
x Direct materials required per unit (pounds)	5	5	5
Total direct materials required for production	159500	112000	130500
Add: Desired ending inventory (24% x 112000); (24% x 130500)	26880	31320
Total needed	186380	143320
Less: Beginning inventory (24% x 159500)	38280	26880
Direct materials to be purchased (pounds)	148100	116440
Direct materials price per pound $	2.75	2.75
Total cost of direct material purchases $	407275	320210

	October
Cash payments for:
September purchases (60% x $407275)	244365
October purchases (40% x $320210)	128084
Total expected cash payments for direct material purchases $	372449

Budgeted cash payments for direct materials in October: $372,449