Question

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 9.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:

August	24,200	units
September	22,900	units
October	24,300	units
November	25,500	units
December	25,200	units

The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 12,400 kilograms of Jurislon were on hand. The cost of Jurislon is $23 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.

The total cost of Jurislon to be purchased in August is:

Answer 1

		August	September
A	Budgeted Production of Miniwarps (Units)	24,200	22,900
B	Requirement of Jurislon per Miniwarp (kg)	9.5	9.5
C	Need of Jurislon (kg) (A*B)	229,900	217,550
D	Ending Inventory of Jurislon (20% of sep C)	43,510
E	Availability of Jurislon (C+D)	273,410
F	Beginning Inventory of Jurislon (kg)	12,400
G	Purchases of Jurislon (E-F)	261,010
H	Cost of Jurislon per kg	$23
I	Total Cost of Jurislon to be purchased (G*H)	$6,003,230

The total cost of Jurislon to be purchased in August = $6,003,230