Question

Magnolia Candle Inc. budgeted production of 74,200 candles in 20Y4. Wax is required to produce a candle. Assume that eight ounces (one-half of a pound) of wax is required for each candle. The estimated January 1, 20Y4, wax inventory is 2,500 pounds. The desired December 31, 20Y4, wax inventory is 2,100 pounds.

If candle wax costs $4.10 per pound, determine the direct materials purchases budget for 20Y4.

Answer 1

Direct Material Budget

Units to be produced	74,200
Direct material per unit	0.5
Total pounds needed for production	74,200 x 0.5 = 37,100
Desired ending direct materials pounds	2,100
Total materials required	39,200
Beginning direct materials pounds	-2,500
Direct materials purchases	36,700
Cost per pound	$4.10
Total cost of direct materials purchases	$150,470

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