Question

Preston, Inc., manufactures wooden shelving units for collecting and sorting mail. The company expects to produce 350 units in July and 430 units in August. Each unit requires 9 feet of wood at a cost of $0.80 per foot. Preston wants to always have 250 feet of wood on hand in materials inventory. Compute Preston’s raw materials purchases budget for July and August.

Answer 1

(i) $2,520

(ii) $3,096

Step-by-step explanation:

Budgeted Raw Materials Purchases for July:

Total materials required = Units to be produced × Feet per unit

= 350 units × 9

= 3,150

Budgeted Raw Materials Purchases = Total materials required × Cost per foot

= 3,150 × $0.80

= $2,520

Budgeted Raw Materials Purchases for August:

Total materials required = Units to be produced × Feet per unit

= 430 units × 9

= 3,870

Budgeted Raw Materials Purchases = Total materials required × Cost per foot

= 3,870 × $0.80

= $3,096