This is the number of pounds that needs to be purchased. The question asks for the estimated cost of direct materials purchased. The amount of direct materials purchased must be multiplied by the cost per pound to calculate the estimated cost of direct materials purchased.
This is the number of pounds that will be used in production multiplied by the cost per pound of $1.20. The question asks for the estimated cost of direct materials purchased. The amount of direct materials purchased is different from the amount used, because beginning inventory and ending inventory requirements need to be considered, as well.
First, we need to identify the quantity of material that needs to be purchased, then calculate its cost. The beginning inventory level on July 1 is 800,000 pounds. Since each unit of finished goods requires 4 pounds of direct materials, the amount of direct materials to be used in production is 600,000 × 4, or 2,400,000 pounds.The amount of direct materials inventory on hand at the end of the 3-month period is to be equal to 25% of the use in that period. Therefore, ending inventory needs to be 600,000 pounds of material (2,400,000 lb. × 25%). Now we can determine the quantity to be purchased: Beginning Inventory + Quantity Purchased ? Quantity Used in Production = Ending Inventory 800,000 + Quantity Purchased ? 2,400,000 = 600,000 Solving for Quantity Purchased, Quantity Purchased = 2,200,000 pounds. Given a cost of $1.20 per pound of material, we can determine the cost of materials to be purchased is $2,640,000 ($1.20 × 2,200,000).
This is the number of pounds that will be used. The question asks for the estimated cost of direct materials purchased. The amount of direct materials purchased is different from the amount used, because beginning inventory and ending inventory requirements need to be considered, as well. Furthermore, the amount of direct materials purchased must be multiplied by the cost per pound to calculate the estimated cost of direct materials purchased.
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