Question

A company manufactures widgets.   Based on an analysis, we find that each widget needs 3/4 pound...

A company manufactures widgets.   Based on an analysis, we find that each widget needs 3/4 pound of “gunk.” The following is information on the budgeted production of widgets in units for the following three months:

                                                   July               August         September

Budgeted production                21,000             20,000             24,000

We know that this company desires to maintain monthly ending inventories of “gunk” amounting to 25% of the following month's budgeted production needs. The cost per pound of “gunk” is $2.12.

Instructions

Prepare a direct materials purchases budget for the month of August.

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