Planton Manufacturing plans to produce 20,000 units, 24,000 units, and 30,000 units, respectively, in October, November, and December. Each of these units requires four units of part no. 879, which the company can purchase for $7 each. Planton has 35,000 units of part no. 879 in stock on September 30.Required: Prepare a direct-material purchases budget for October and November in units and dollars. Management desires to maintain an ending raw-material inventory equal to 40% of the following month's production usage.
What will be an ideal response?
| ? | October | November |
| Planned production | 20,000 | 20,400 |
| Units of part No. 879 | × 4 | × 4 |
| Units of part No. 879 used in production | 80,000 | 96,000 |
| Add: Desired ending inventory * | 38,400 | 48,000 |
| Total units of part No. 879 needed | 118,400 | 144,000 |
| Less: Beginning inventory of part No. 879 | 35,000 | 38,400 |
| Units of part No. 879 to be purchased | 83,400 | 105,600 |
| Cost per unit | × $7 | × $7 |
| Cost of direct material purchases | $583,800 | $739,200 |
* October: 24,000 × 4 × 40%; November: 30,000 × 4 × 40%
Business
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