Cowles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:

The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs. On July 31, this requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.
-The total cost of Material K to be purchased in August is:

Question

Cowles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:

The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs. On July 31, this requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.
-The total cost of Material K to be purchased in August is:

Quizplus · Accepted Answer

To calculate the total cost of Material K to be purchased in August, we need to multiply the quantity of Material K to be purchased by its cost per unit.

Quantity of Material K to be purchased in August = 2000 units 
Cost per unit of Material K = $19.06

Total cost of Material K = 2000 x $19.06 = $38,120

Therefore, the best choice is option B, which gives the correct total cost of Material K to be purchased in August.