Question

1. Boca Jr, Inc., expects to sell 8,900 soccer balls for $35 each in 2012. Direct materials costs are $7 per yard, direct manufacturing labor is $8 per labor hour, and manufacturing overhead is $3.5 per soccer ball. Each ball requires 0.75 yards of synthetic leather and 1.5 labor hours. The following inventory levels apply to 2018:
   
                                Beginning inventory           Ending inventory

Direct materials               275 yards                   540 yards
Work-in-process inventory       0 units                                          0 units
Finished goods inventory 170 units                          250 units

What is the dollar amount budgeted for direct material purchases in 2018?

1. $7,000
2. $49,000
3. $8,980
4. $45,290

Answer 1

Answer: b)$49,000

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Computation of direct material purchases in 2018
Finished goods to be produced                                           [Refer working note ]              (a)	8,980
Direct materials (yards) needed per unit of finished good                                                     (b)	0.75
Direct materials needed for production                                                                                  (a x b)	6,735
Plus: Desired ending inventory of direct materials	540
Total direct materials needed	7,275
Less: Beginning inventory of direct materials	275
Budgeted purchases of direct materials                                                                                 (c)	7,000
Direct materials cost per unit                                                                                                  (d)	$7
Direct materials purchase cost                                                                                             (c x d)	$49,000

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Working note 1 - Production Budget
Expected units sales	8,900
Add: Desired ending inventory of finished goods	250
Total units needed	9,150
Less: Beginning inventory of finished goods	170
Finished good units to be produced	8,980