Sunrise Poles manufactures hiking poles and is planning on producing 4,000 units in March and 3,700...

Sunrise Poles manufactures hiking poles and is planning on producing 4,000 units in March and 3,700 in April. Each pole requires a half pound of material, which costs $1.20 per pound. The company’s policy is to have enough material on hand to equal 10% of the next month’s production needs and to maintain a finished goods inventory equal to 25% of the next month’s production needs. What is the budgeted cost of purchases for March?

Expert Solution

Ans.	Sunrise Poles
	Direct Materials Budget
	For the Month of March
	Particulars	March
	Units to be produced	4000
	(X) Direct materials per unit	0.5
	Total pounds needed for production	2000
	Add: Desired ending direct materials (pounds)	185
	Total materials required	2185
	Less: Beginning direct materials (pounds)	-200
	Materials to be purchased	1985
	(X) Cost per pound	$1.20
	Budgeted cost of purchase	$2,382

	*Working Notes:

	*Calculations for materials needed for production:

	Particulars	April
	Units to be produced	3700
	(X) Direct materials per unit	0.5
	Total pounds needed for production	1850

	Ending inventory of March = Total pounds needed in April 10%
	1,850 * 10% = 185

	*Beginning materials inventory for March = Ending materials inventory of February = 10% of March month's pounds needed
	2,000 * 10% = 200

ekkarill92 answered 2 years ago

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