Question

Cowles Corporation makes a sells a single product. Product R. Three yards of Material K is needed to make one unit of Product R. Budget production R for the next five months is as follow.

August: 13, 000 units

Sept. 13,500 units

Oct. 14,500 units

Nov. 13,600 units

Dece. 12,900 units.

The company wants to maintain monthly end inventory of material K equal to 30% of the following month's production needs. On July 31, the requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is .80 per yards The company wants to prepare a Direct Material purchases budget for the rest of the year.

question 1: The total cost of Material to be purchased in August.

question: 2. The desired ending inventory of Material K for September is.

question 3. The total needs (i.e. production requirements plus desired ending inventory of Mat Material K for November are

Answer 1

	August	September	October	November	December
Budget Production	13,000	13,500	14,500	13,600	12,900
Material K per Unit	3	3	3	3	3
Material K required	39,000	40,500	43,500	40,800	38,700
+ Desired Closing Inventory = 30% of next month	12,150	13,050	12,240	11,610
Total Material Required	51,150	53,550	55,740	52,410
Less: Opening Stock	3,500	12,150	13,050	12,240
Material to be purchased	47,650	41,400	42,690	40,170
Cost per Yard	0.8	0.8	0.8	0.8
Total Cost	38,120	33,120	34,152	32,136

Hence, the answers are:

1.Total Cost of material to be purchased in August = $38,120

2.The desired inventory of Material K for September = 13,050 units

3. Total needs for November = 52,410 units