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16 May, 11:58

Smoke, Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic. Budgeted production of buckets in units for the next three months is as follows: April May June Budgeted production 21,000 22,000 24,000 The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is $2.20 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

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  1. 16 May, 15:07
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    Total purchase = $24,750

    Explanation:

    Giving the following information:

    Each bucket uses 1/2 pound of plastic.

    Production:

    May = 22,000

    June = 24,000

    The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs.

    The cost of plastic is $2.20 per pound.

    Direct material budget:

    Sales for May = (22,000*0.5 pound * $2.2) = $24,200

    Ending inventory = (24,000*0.5 pound * $2.2) * 0.25 = 6,600

    Beginning inventory = (24,200*0.25) = (6,050)

    Total = $24,750
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