Alliance Company's budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 40% of the following month's budgeted materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted materials cost for January?
A) $240,000.
B) $352,000.
C) $256,000.
D) $144,000.
E) $208,000.
C) $256,000.
Explanation: Budgeted production units * materials requirement per unit = materials needed Materials needed + ending inventory requirements - beginning inventory available = materials to be purchased
24,000 * 4 lbs. = 96,000 lbs. 96,000 lbs. + (28,000 * 4 lbs. * 40%) - 38,400 lbs. = 102,400 lbs × $2.50 per lb. = $256,000.
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