Question

Killingsworth Inc. budgeted production of 57,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 41 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 117,000 square yards. The desired December 31, 20Y6, paper inventory is 105,000 square yards. If paper costs $0.17 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar.

$

Answer 1

The direct materials purchases budget for 20Y6 is calculated as follows:

	Units
Total square yards of paper are required for 57,000 personal journals   (57,000 * 41 )	2,337,000
Add: Desired paper inventory, December 31, 20Y6,	105,000
Less: Estimated paper inventory, January 1, 20Y6,	(117,000)
Total square yards of paper purchased (A)	2,325,000
Cost of paper per yard (B)	$0.17
Cost of total 2,325,000 square yards of paper purchased (A * B)	$395,250

The direct materials purchases budget for 20Y6 is $395,250