Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:
The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 10,800 kilograms of Jurislon were on hand. The cost of Jurislon is $18.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.
-The desired ending inventory of Jurislon for September is:

Question

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows:
  The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 10,800 kilograms of Jurislon were on hand. The cost of Jurislon is $18.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.
-The desired ending inventory of Jurislon for September is:

Quizplus · Accepted Answer

Ending inventory of Jurislon for September = 20% of October's production needs = 20% × 22,700 units × 2.5 kilograms per unit = 11,350 kilograms
Cost of ending inventory of Jurilson = 11,350 kilograms × $18.00 per kilogram = $204,300

Caspion Corporation Makes and Sells a Product Called a Miniwarp