Question

Cloud Shoes manufactures recovery sandals and is planning on producing 12,000 units in March and 11,500 in April. Each sandal requires 1.2 yards if material, which costs $3.00 per yard. The company’s policy is to have enough material on hand to equal 15% of next month’s production needs and to maintain a finished goods inventory equal to 20% of the next month’s production needs. What is the budgeted cost of purchases for March?

Answer 1

Given Cloud Shoes Manufactures Recovery Sandals.

Budgeted Units for March = 12,000 units

Budgetes units for April = 11,500 Units

Each Sandal requires 1.2 yards of Material

Cost per yard of material = $ 3

Material cost for each unit = 1.2 yards * $3 = $3.6

Calculation of Budgeted Costs of purchases for March
Particulars	March
Budegeted Units	12000
Material Cost for each unit	$3.6
Total Materila cost for Budgeted units of March	$43,200 (12000 units * $3.6)
Budgeted units of April	11500
15% of April's Production	1725 units (11500 units *15%)
Material cost for 15% of Budegetd units of April	$6210 (1725 units * $3.6)
Total Budgeted costs for purchase for March	$49,410 ($43,200 + $6210)

Hence, The Budgeted Costs of Purchases for March is $49,410