Question

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?

Answer 1

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