Question

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

Answer 1

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