Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 20% of the units budgeted in the following month. There was 3,160 ounces of direct material in inventory at the start of July
- The total amount of direct materials in ounces, to be purchased in July is:

Question

Quizplus · Accepted Answer

To determine the total amount of direct materials to be purchased in July, we need to calculate the direct materials required for production in July, add the direct materials required for safety stock, and subtract the direct materials available at the start of July.

Direct materials required for production in July = (7,900 units x 2 oz.) = 15,800 oz.

Direct materials required for safety stock at the end of July = (8,100 units x 20% x 2 oz.) = 3,240 oz.

Total direct materials required in July = (15,800 oz. + 3,240 oz.) = 19,040 oz.

Subtracting the direct materials available at the start of July (3,160 oz.) from the total direct materials required in July gives us the amount of direct materials to be purchased in July:

Direct materials to be purchased in July = (19,040 oz. - 3,160 oz.) = 15,880 oz.

Therefore, the answer is C) 15,880 oz.

Flagstaff Company Has Budgeted Production Units of 7,900 for July