Seranno Inc. budgeted production of 47,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 115 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 324,000 square yards. The desired December 31, 20Y6, paper inventory is 243,000 square yards. If paper costs $0.13 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar.

Question

Tony Black

Business

4 June, 17:59

Seranno Inc. budgeted production of 47,000 personal journals in 20Y6. Paper is required to produce a journal. Assume 115 square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 324,000 square yards. The desired December 31, 20Y6, paper inventory is 243,000 square yards. If paper costs $0.13 per square yard, determine the direct materials purchases budget for 20Y6. If required, round your final answer to the nearest dollar.

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Alexia Dalton · Answer 1

Purchases (yards) = 5,324,000 square yards

Total cost = $692,120

Explanation:

Giving the following information:

The number of units = 47,000

Quantity required (unitary) = 115 square yards

Beginning inventory = 324,000 square yards.

Desired ending inventory = 243,000 square yards.

Paper costs $0.13 per square yard.

To calculate the purchase required, we need to use the following formula:

Purchases (yards) = production + desired ending inventory - beginning inventory

Purchases (yards) = 47,000*115 + 243,000 - 324,000

Purchases (yards) = 5,324,000 square yards

Now, the total cost:

Total cost = 5,324,000*0.13 = $692,120