Coles Company, Inc. makes and sells a single product, Product R. Three yards of
ID: 2442975 • Letter: C
Question
Coles Company, 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:August 14,000 units
September 14,500 units
October 15,500 units
November 12,600 units
December 11,900 units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement wasn't met because only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 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
A. $33,840.
B. $48,200.
C. $42,300.
D. $40,970.
Explanation / Answer
The total cost of Material K to be purchased in August is D. $40,970.