Question

Fantastic Futons buys direct materials for the futons in cloth rolls priced at $80 each. Each roll provides direct material for 40 futons. There was two (2) rolls in the direct materials inventory at the beginning of January, and the company expects to have four (4) rolls in inventory at the end of the month. Assuming the production budget calls for 50,000 futons to be produced in January, what would be the amount of the direct materials purchase budget for the cloth rolls for January? After calculating the number of rolls needed, you need to calculate $.

Answer 1

Part a)

Direct material Purchases in number of rolls

= desired ending inventory + required for production - beginning inventory

= 4 +(50000/40) - 2

= 4 + 1250 - 2

= 1252

Thus the correct answer Number of rolls to be purchased = 1252 rolls

Part 2)

Amount of direct material purchases

= number of rolls to be purchased * price per unit

= 1252 *80

= $ 100160

Thus the correct answer direct material purchases in dollars = $ 100160

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