Tango Ltd estimates their sales volume for quarter 1 is 32,292 units. The beginning materials inventory is $300 000 and the desired ending materials inventory is $240 000. The materials cost per unit is $60.

Calculate the budgeted direct materials cost for quarter 1.

Question

Tango Ltd estimates their sales volume for quarter 1 is 32,292 units. The beginning materials inventory is $300 000 and the desired ending materials inventory is $240 000. The materials cost per unit is $60.

Calculate the budgeted direct materials cost for quarter 1.

BlackTom AI · Accepted Answer

We start by identifying the given data: budgeted sales/production for quarter 1 is 32,292 units, the cost of materials per unit is $60, the beginning materials inventory is $300,000, and the desired ending materials inventory is $240,000.
Next, we determine how much direct materials will be used for production. If each unit requires $60 of materials, the total materials required for the budgeted production is 32,292 units × $60 per unit = $1,937,520.
However, we do not need to purchase this entire amount in cash at the start of the period because some materials are already on hand and some will still be in ending inventory. The change in materials inventory is Ending − Beginning = $240,000 − $300,000 = −$60,000.
To find the budgeted purchases of direct materials, we add the required usage to the change in inventory: $1,937,520 + (−$60,000) = $1,877,520.
Therefore, the budgeted direct materials purchases for quarter 1 equal $1,877,520. This approach uses the standard formula: Purchases = (Units × Cost per unit) + Ending inventory − Beginning inventory, applied to the given values.
Note: If the problem asked only for the direct materials cost used in production (not purchases), the figure would be $1,937,520, but the inclusion of beginning and ending inventories indicates the focus is on the budgeted purchases.

BACC011 Week 9: Practice Quiz

Tango Ltd estimates their sales volume for quarter 1 is 32,292 units. The beginning materials inventory is $300 000 and the desired ending materials inventory is $240 000. The materials cost per unit is $60. Calculate the budgeted direct materials cost for quarter 1.

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