Question

CHOP Inc., which makes only one product, Yester, has the following information available for the coming...

CHOP Inc., which makes only one product, Yester, has the following information available for the coming year. CHOP expects sales to be 27,000 units at $32 per unit. The current inventory of Yester is 3,500 units. CHOP wants an ending inventory of 4,200 units. Each unit of Yester takes two units of component K. Component K is estimated to cost $9 per unit. Current inventory of K is 3,900 units. CHOP wants 5,800 units of K on hand at the end of the next year.
How much will the direct materials budget show as the cost of materials to be purchased?

$515,700

$477,900

$473,400

$257,400
Business   Accounting   
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Answer #1
Units
Expected sales 27000
(+) Desired ending inventory 4200
(-) Beginning inventory 3500
Budgeted production 27700
Units
Budgeted production 27700
(*) Units of raw materials required per unit 2
Total production needs 55400
(+) Desired ending inventory of direct materials 5800
(-) Beginning inventory of direct materials 3900
Budgeted direct materials to be purchased 57300
(*) Cost per unit of direct materials 9
Cost of materials to be purchased 515700
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