XYZ Company makes and sells a single product. Each finished unit requires two pounds of direct materials. The budgeted units to be produced over the next four months is as follows: Budgeted Units to be Produced January 18,000 units February 19,000 units March 16,000 units April 25,000 units The company wants to maintain monthly ending inventories of direct materials equal to 20% of the following month's production needs. The cost of the direct materials is $2.50 per pound.
Calculate the total cost of direct materials budgeted to be purchased in February.
Direct material is the cost of raw material that is used in the production process within a year. The cost of material is a direct cost because it is attributable to the finished goods. Direct material is a variable cost that increases with the increase in the production level.
Answer and Explanation:
|total cost of direct materials budgeted to be purchased in February||92,000.00|
|Statement showing computations|
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fromChapter 11 / Lesson 6
Preparing a direct materials budget will aid a business in ordering the correct amount of materials in order to keep up with their customer supply and demand. Learn more about what a direct material budget is, the formula needed for it, how its used, and read examples.