Question
In: Accounting
Dorothy's budgeted production figures (in units) for burlap sweatshirts for next quarter are shown below: &nbs
Dorothy's budgeted production figures (in units) for burlap sweatshirts for next quarter are shown below:
July August September
Expected Production 3,600 4,100 5,000
Dorothy uses 1.2 yards of burlap per sweatshirt and pays $0.75 per yard of burlap. Dorothy likes to have half of the next month's burlap needs in ending inventory. What is the expected cost of burlap to be purchased for sweatshirts in August?
A. $5,460
B. $4,550 D. $3,285
C. $4,095 E. none of the above
Solutions
Expert Solution
| Calculations | Particulars | July | August | September |
| A | Expected Production | 3,600 | 4,100 | 5,000 |
| B | Material required per unit | 1.2 | 1.2 | 1.2 |
| C = A x B | Total materials required for production | 4,320 | 4,920 | 6,000 |
| D = Next month C x 50% | Closing Inventory of material | 2,460 | 3,000 | - |
| E = Previous month D | Opening Inventory of material | - | 2,460 | 3,000 |
| F = C+D-E | Purchases of materials | 5,460 | ||
| G | Price per unit | 0.75 | ||
| H = F x G | Cost of purchases | 4,095 |
So, as per above calculations, option C is the correct option
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