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Waterford Enterprises' unit production was budgeted for the first six months of its fiscal year as follows:
Each unit of product requires 15 pounds of raw material and management wants to maintain an ending inventory of raw material equal to 12% of the next month's production requirements.
-The direct materials purchases budget for June is:

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Use the following to answer questions 
Waterford Enterprises' unit production was budgeted for the first six months of its fiscal year as follows:
  Each unit of product requires 15 pounds of raw material and management wants to maintain an ending inventory of raw material equal to 12% of the next month's production requirements.
-The direct materials purchases budget for June is:

Quizplus · Accepted Answer

The production budget indicates that the total production requirements for June are (30,000 units x 15 pounds per unit) = 450,000 pounds of raw material.

Management wants to maintain an ending inventory of raw material equal to 12% of the next month's production requirements, which is (12% x 450,000 pounds) = 54,000 pounds.

Therefore, the total raw material needed for June is (450,000 + 54,000) = 504,000 pounds.

The cost per pound of raw material is given as $1.10.

Hence, the direct materials purchases budget for June is (504,000 x $1.10) = $537,300.

Therefore, the best choice is option B.

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