Question

Problem 3 Wynn, Inc. manufactures beanies. The budgeted units to be produced and sold are below Expected Production 3,500 2,800 Expected Sales 2,900 3,900 August September It takes 18 yards of yam to produce a beanie. The company's policy is to maintain yarn at the end of each month equal to 5 % of next month's production needs and to maintain a finished goods inventory at the end of each month equal to 20 % of next month's anticipated production needs. The cost of yarn is $0.20 a yard. At August 1, 3,150 yards of yam were on hand Instructions Compute the budgeted cost of purchases at the end of August.

Answer 1

Budgeted purchases is used to estimate thee budgeted cost for purchases during a particular period
Budgeted purchases at end of August is shown below
	August
Expected production	3500	Given
Material required per unit	18	Given
Total material required for expected production	63000	3500*18
Add: Desired ending inventory	2520	(2800*18*5%)
Total required material	65520.00	(63000+2520)
Less: Beginning raw material available	3150.00
Budgeted purchases	62370.00	(65520-3150)
Cost of yarn	$0.20
Budgeted purchases	$12,474.00	(62370*0.20)
Thus, budgeted purchases for August is $12,474