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 45% of the following month's production needs. The cost of
direct materials is $1.60 per pound.

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

Answer 1

Ans.	Total cost of direct materials budgeted to be purchased in february         210728.
	Particulars		February
	Production needs		129500
	Add: Desired ending inventory		60480
	Total needs		189980
	Less: Beginning inventory		-58275
	Raw materials to be purcahsed		131705
	Cost of raw materials purchased		210728
	Cost of raw materials purchased =	Raw materials to be purchased * cost per pound
		131705 * 1.60
		210728
	Production needs    =   Units to be produced * raw material needs per unit
		Feb.	18500 * 7	129500
		March	19200 * 7	134400
	Desired ending inventory (february) = 45% of March production needs
				134400 * 45%
				60480
	Beginning inventory (feb.) = Ending inventory of previous month (jan.)
	*Ending inventory of january = 45% of february production needs
				129500 * 45%
				58275