Richard Inc.expects to sell 28,000 units.Each unit requires 4 pounds of direct materials at $15 per pound and 3 direct labor hours at $12 per direct labor hour.The overhead rate is $9 per direct labor hour.The beginning inventories are as follows: direct materials,2,500 pounds;finished goods,3,100 units.The planned ending inventories are as follows: direct materials,4,000 pounds;finished goods,3,200 units.
-Given a planned production of 5,000 units,what are the planned direct materials purchases of Richard?
A)$300,000
B)$258,000
C)$240,000
D)$322,500

Question

Richard Inc.expects to sell 28,000 units.Each unit requires 4 pounds of direct materials at $15 per pound and 3 direct labor hours at $12 per direct labor hour.The overhead rate is $9 per direct labor hour.The beginning inventories are as follows: direct materials,2,500 pounds;finished goods,3,100 units.The planned ending inventories are as follows: direct materials,4,000 pounds;finished goods,3,200 units. 
-Given a planned production of 5,000 units,what are the planned direct materials purchases of Richard?
A)$300,000
B)$258,000
C)$240,000
D)$322,500

Quizplus · Accepted Answer

The planned direct materials purchases can be calculated as follows: Required materials for production = 5,000 units * 4 pounds/unit = 20,000 pounds. Total required materials = 20,000 pounds + Ending inventory (4,000 pounds) - Beginning inventory (2,500 pounds) = 21,500 pounds. Total purchases = 21,500 pounds * $15/pound = $322,500.