Question

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

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

Jordan Company wants to maintain monthly ending inventories of direct
materials that are equal to 18% of the following month's production
needs. The cost of direct materials is $2.75 per pound.

Calculate the total cost of direct materials budgeted to be purchased
in September.

Answer 1

Cost of direct materials to be purchased

= Budgeted production + Desired ending inventory - Beginning inventory

= (22,400*4*2.75) + (31,900*4*18%*2.75) - (22,400*4*2.75*18%)

= 246,400 + 63,162 - 44,352

= 265,210