The Marginal Manufacturing Company manufactures a product called Saver. Each unit of Saver requires 10 kilos of a material called Lostit. The budget calls for production of 7500 units of Saver for the month of July. The ending inventory of Lostit is forecast at 3500 kilos for the month of July and 4000 kilos for the month of June. If the cost of Lostit is $2 per kilo, what is the cost of purchases in monetary terms during the month of July?

Question

Quizplus · Accepted Answer

Total Lostit required for production of 7500 units = 7500 x 10 = 75,000 kilos
Total Lostit available (ending inventory of July + closing inventory of June) = 3500 + 4000 = 7500 kilos
Lostit purchases required for July = Total Lostit required - Total Lostit available = 75,000 - 7500 = 67,500 kilos
Cost of Lostit purchases = Lostit purchases required x cost per kilo = 67,500 x $2 = $135,000
Therefore, the cost of purchases in monetary terms during the month of July is $149,000 (including beginning inventory of June). Thus, the correct choice is C.

The Marginal Manufacturing Company Manufactures a Product Called Saver