Question

Alliance Company’s budgets production of 20,000 units in January and 24,000 units in the February. Each finished unit requires 3 pounds of raw material K that costs $2.00 per pound. Each month’s ending raw materials inventory should equal 30% of the following month’s budgeted materials. The January 1 inventory for this material is 18,000 pounds. What is the budgeted materials cost for January?

Flannigan Company manufactures and sells a single product that sells for $650 per unit; variable costs are $390. Annual fixed costs are $880,000. Current sales volume is $4,400,000. Compute the contribution margin per unit.

Answer 1

Ans. 1	Alliance Company
	Direct Materials Budget
	Particulars	January
	Budgeted production (units)	20000
	(X) Materials requirement per unit	3
	Budgeted Materials needed for production	60000
	Add: budgeted ending inventory	21600
	Total materials requirements	81600
	Less: Budgeted beginning inventory	-18000
	Materials to be purchased	63600
	(X) Direct materials per unit	$2.00
	Total direct materials cost	$127,200
	*Calculations:
	*Budgeted materials for the month of February:
	Budgeted production (units)	24000
	(X) Materials requirement per unit	3
	Budgeted Materials needed for production	72000
	*Ending inventory for January = Budgeted materials for February * 30%
	21600
Ans. 2	Contribution margin per unit = Selling price per unit - Variable cost per unit
	$650 - $390
	$260	per unit