Question

Alliance Company’s budgets production of 34,000 units in January and 38,000 units in the February. Each...

Alliance Company’s budgets production of 34,000 units in January and 38,000 units in the February. Each finished unit requires 3 pounds of raw material K that costs $3.00 per pound. Each month’s ending raw materials inventory should equal 40% of the following month’s budgeted materials. The January 1 inventory for this material is 40,800 pounds. What is the budgeted materials cost for January?

Homework Answers

Answer #1

Budgeted materials cost for January = $320400

Explanation;

First of all let’s calculate required raw materials to be purchased in January;

Materials needed for production of 34000 units (34000 * 3)

102000

Add: Required ending raw materials (38000 * 3) * 0.40

45600

Less: Beginning raw materials

(40800)

Raw materials to be purchased in January

106800 pounds

Now, let’s calculate budgeted materials cost for January;

Budgeted raw materials * price per pound

(106800 * $3) = $320400

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