Cape Corporation sells a single product.Budgeted sales for the year are anticipated to be 640,000 units,estimated beginning inventory is 98,000 units,and desired ending inventory is 80,000 units.The quantities of direct materials expected to be used for each unit of finished product are given below.

-The amount of direct material A purchased during the year is
A)$216,000.
B)$186,600.
C)$192,000.
D)$245,400.

Question

Cape Corporation sells a single product.Budgeted sales for the year are anticipated to be 640,000 units,estimated beginning inventory is 98,000 units,and desired ending inventory is 80,000 units.The quantities of direct materials expected to be used for each unit of finished product are given below.
 
-The amount of direct material A purchased during the year is
A)$216,000. 
B)$186,600. 
C)$192,000. 
D)$245,400.

Quizplus · Accepted Answer

The first step is to calculate the total quantity of direct material A needed for the budgeted production:

Total direct material A needed = Budgeted production x Direct material A needed per unit
Total direct material A needed = 640,000 units x 0.3 lbs per unit
Total direct material A needed = 192,000 lbs

Next, we need to consider the beginning and ending inventory levels of direct material A:

Total direct material A needed = Direct material A used in production + Ending inventory of direct material A - Beginning inventory of direct material A

Solving for Direct material A used in production:

Direct material A used in production = Total direct material A needed + Beginning inventory of direct material A - Ending inventory of direct material A
Direct material A used in production = 192,000 lbs + 98,000 lbs - 80,000 lbs
Direct material A used in production = 210,000 lbs

Finally, we can calculate the amount of direct material A purchased:

Amount of direct material A purchased = Direct material A used in production / Direct material A purchase price per lb
Amount of direct material A purchased = 210,000 lbs / $0.89 per lb
Amount of direct material A purchased = $186,600

Therefore, the answer is B) $186,600.

Cape Corporation Sells a Single Product