Norton Manufacturing expects to produce 2,800 units in January and 3,900 units in February. Norton budgets $45 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $37,950. Norton desires the ending balance in Raw Materials Inventory to be 60% of the next month's direct materials needed for production. Desired ending balance for February is $51,000. What is the cost of budgeted purchases of direct materials needed for January?

Question

Broderick Ross

Business

18 February, 19:22

Norton Manufacturing expects to produce 2,800 units in January and 3,900 units in February. Norton budgets $45 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $37,950. Norton desires the ending balance in Raw Materials Inventory to be 60% of the next month's direct materials needed for production. Desired ending balance for February is $51,000. What is the cost of budgeted purchases of direct materials needed for January?

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Brownie · Answer 1

Budgeted purchase = $193350

Explanation:

We need to calculate the cost of direct material during January. We need to know what are the purchase of direct material needed to produce the current month goods and for next month.

The unitary cost of material is $45, January's production 2800 units, February production 3900 units.

Direct material for Januarys production:

2800 units * $45 = $126000

Direct material for February:

($45*3900) * 0,60 = $105300

Initial inventory = 37950

Budgeted purchase = 126000+105300-37950 = $193350