Question

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 6.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:

August	23,000 units
September	21,700 units
October	23,100 units
November	24,300 units
December	24,000 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 11,200 kilograms of Jurislon were on hand. The cost of Jurislon is $22 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

Answer
Correct Answer = $3,663,220
		August
A	Budgeted production	23,000
B = A x 6.5 kgs	Total raw material required	149,500
C = 21700 units x 6.5 x 20%	Desired ending raw material inventory	28,210
D	Beginning raw material inventory	11,200
E = B+C-D	Raw material to be purchased	166,510
F	Cost per kg	$              22
G = E x F	Total cost to be purchased in Aug	$ 3,663,220