Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2014 are as follows: Finished goods inventory at the end of 2013 was 10,000 units.On average,25 percent of the futons to be sold in the next month are produced and kept as ending balance in finished goods inventory.The planned selling price is $150 per unit.
-Fantastic Futons buys direct materials for the futons in cloth rolls priced at $80 each.Each roll provides direct material for 40 futons.There was one roll in the direct materials inventory at the beginning of January,and the company expects to have four rolls in inventory at the end of the month.Assuming the production budget calls for 60,000 units to be produced in January,what would be the amount of the cloth rolls direct materials purchases budget for that month?
A)$119,760
B)$114,000
C)$120,000
D)$120,240

Question

Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2014 are as follows:  Finished goods inventory at the end of 2013 was 10,000 units.On average,25 percent of the futons to be sold in the next month are produced and kept as ending balance in finished goods inventory.The planned selling price is $150 per unit.
-Fantastic Futons buys direct materials for the futons in cloth rolls priced at $80 each.Each roll provides direct material for 40 futons.There was one roll in the direct materials inventory at the beginning of January,and the company expects to have four rolls in inventory at the end of the month.Assuming the production budget calls for 60,000 units to be produced in January,what would be the amount of the cloth rolls direct materials purchases budget for that month?
A)$119,760 
B)$114,000 
C)$120,000 
D)$120,240

Quizplus · Accepted Answer

To calculate the direct materials purchases budget for the cloth rolls, first determine the total number of rolls needed for production. With 60,000 units to be produced and each roll providing material for 40 futons, 60,000 / 40 = 1,500 rolls are needed for production. Starting with one roll and wanting to end with four rolls means an additional three rolls must be accounted for, so 1,500 + 3 = 1,503 rolls are needed in total. At $80 each, the budget is 1,503 rolls * $80 = $120,240.

Fantastic Futons Manufactures Futons