Question

Legalos Company makes and sells a single product. It takes seven pounds of
direct materials to produce one unit of this product. Budgeted production
for the next three months is given below:

                  Budgeted Units to be Produced            
February                  18,500 units
March                     19,200 units
April                     14,300 units

The company wants to maintain monthly ending inventories of direct materials
that are equal to 54% of the following month's production needs. The cost of
direct materials is $1.50 per pound.

Calculate the total cost of direct materials budgeted to be purchased in
February.

Answer 1

Correct Answer $303114
Legalos Company
Direct Material Budget
	February	March	April
Required production in Units of finished goods	18,500	19,200	14,300
Units of raw material needed per Units of finished goods	7	7	7
Units of raw material needed to meet production	129,500	134,400	100,100
Add: Desired units of ending raw material inventory	72,576	54,054
Total units of raw material inventory needed	202,076	188,454	100,100
Less: Units of beginning raw material inventory	-	72,576	54,054
units of raw materials to be purchased	202,076	115,878	46,046
Rate per Unit	1.5
Cost of purchase of direct material	303,114
Note: In this question ending inventory of January or we can say beginning inventory for February is not given. If it was given same should be deducted to computes units of raw material to be purchased.