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 of budgeted production in the following month.There was 3,160 ounces of direct material in inventory at the start of July.The total cost of direct materials purchases for the July direct materials budget,assuming the materials cost $1.15 per ounce,is:

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To calculate the total cost of direct materials purchases for July, we first determine the total materials needed for production in July and the desired ending inventory for July, which becomes the beginning inventory for August. 1. Total materials needed for July production: 7,900 units * 2 oz. = 15,800 oz.2. Desired ending inventory for July (to cover 20% of August production): 8,100 units * 20% * 2 oz. = 3,240 oz.3. Total materials needed in July (for production + ending inventory): 15,800 oz. + 3,240 oz. = 19,040 oz.4. Subtract beginning inventory for July to find how much needs to be purchased: 19,040 oz. - 3,160 oz. = 15,880 oz.5. Calculate the cost of purchases: 15,880 oz. * $1.15/oz. = $18,262.Therefore, the total cost of direct materials purchases for the July direct materials budget is $18,262.

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