Question

Kidman Inc. budgeted production of 40,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 101 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 202,000 square yards. The desired December 31, 20Y6, paper inventory is 141,000 square yards. If paper costs $0.09 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar. $

Answer 1

Direct material purchase budget (Production Units 40000)
(A)	Quantity required for Production units (40000*101)	4040000
(B)	Add: Desired Ending Inventory	141000
(C= (A+B))	Raw material Required	4181000
(D)	Less: Beginning Inventory Available	202000
(E=(C-D))	Total Inventory to be Purchased	3979000
(F)	Cost per Square Yard of paper	$ 0.09
(G=(E*F))	Total cost of Material to be Purchased	$ 358,110

Direct material to be purchased would be Total requirement of the year minus opening quantity available as calculated above.

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