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Direct Materials Purchase Budget

Question 3:

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:

August 30,600 units
September 18,800 units
October 31,800 units
November 26,500 units
December 29,000 units

The company wants to maintain monthly ending inventories of Jurislon equal to 17% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $19 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:





Solution Preview

Units to be purchased= Consumption+closing inventory-opening inventory of raw material

= 30600*2.5+ (18800*2.5*17%)-10400
= 74090kgs

total cost of ...

Solution Summary

This gives the steps to calculate the Direct Materials Purchase Budget