Bake Time makes and sells baking pans. Each pan uses 0.70 pounds of aluminum. Budgeted production and sales of pans in units for the next five months is as follows:
$$\begin{array} { | l | c | c | c | c | c | }
\hline & \text { June } & \text { July } & \text { August } & \text { September } & \text { October } \
\hline \text { Budgeted production } & 22,180 & 21,940 & 24,940 & 26,240 & 23,720 \
\text { Budgeted sales } & 22,400 & 21,300 & 24,500 & 26,700 & 24,400 \
\hline
\end{array}$$
The company wants to maintain monthly ending inventories of aluminum equal to 15% of the following month's budgeted production needs, and monthly inventories of pans equal to 20% of the number needed for next month's sales. The cost of aluminum is $0.85 per pound. How much is the cost of budgeted material purchases for August?

Question

Bake Time makes and sells baking pans. Each pan uses 0.70 pounds of aluminum. Budgeted production and sales of pans in units for the next five months is as follows:
$$\begin{array} { | l | c | c | c | c | c | } 
\hline & \text { June } & \text { July } & \text { August } & \text { September } & \text { October } \
\hline \text { Budgeted production } & 22,180 & 21,940 & 24,940 & 26,240 & 23,720 \
\text { Budgeted sales } & 22,400 & 21,300 & 24,500 & 26,700 & 24,400 \
\hline
\end{array}$$
The company wants to maintain monthly ending inventories of aluminum equal to 15% of the following month's budgeted production needs, and monthly inventories of pans equal to 20% of the number needed for next month's sales. The cost of aluminum is $0.85 per pound. How much is the cost of budgeted material purchases for August?

Quizplus · Accepted Answer

To calculate the cost of budgeted material purchases for August, first determine the aluminum needed for production and ending inventory. Production for August is 24,940 pans, requiring 24,940 * 0.70 = 17,458 pounds of aluminum. The ending inventory for August should be 15% of September's production needs: 26,240 * 0.70 * 0.15 = 2,755.2 pounds. The beginning inventory for August is the ending inventory for July, which is 15% of August's production needs: 24,940 * 0.70 * 0.15 = 2,620.5 pounds. The aluminum to be purchased in August is 17,458 + 2,755.2 - 2,620.5 = 17,592.7 pounds. The cost is 17,592.7 * $0.85 = $14,955.80, which rounds to $14,955.

Bake Time Makes and Sells Baking Pans The Company Wants to Maintain Monthly Ending Inventories of Aluminum