Magnolia Candle Inc. budgeted production of 74,200 candles in 20Y4. Wax is required to produce a candle. Assume that eight ounces (one-half of a pound) of wax is required for each candle. The estimated January 1, 20Y4, wax inventory is 2,500 pounds. The desired December 31, 20Y4, wax inventory is 2,100 pounds. If candle wax costs $4.10 per pound, determine the direct materials purchases budget for 20Y4.

Total budgeted purchase cost = $150,470

Explanation:

Giving the following information:

Production = 74,200

Wax reqired = 0.5 pounds per unit.

January, 1: 2,500 pounds.

December, 31: 2,100 pounds.

Candle wax costs $4.10 per pound, determine the direct material

To determine the direct material purchases budget, we need to use the following formula:

Purchases = sales + desired ending inventory - beginning inventory

First, we will determine the amount of wax to be purchased:

Wax budgeted purchase (in pounds)

Production = (74,200*0.5) = 37,100

Desired ending inventory = 2,100

Beginning inventory = (2,500)

Total = 36,700 pounds

Total budgeted purchase cost = 36,700*4.1 = $150,470