PE 22-3B Direct materials purchases budget

Magnolia Candle Co. budgeted production of 74,200 candles in 2014. Wax is required to produce a candle. Assume eight ounces (one-half of a pound) of wax is required for each candle. The estimated January 1, 2014, wax inventory is 2,500 pounds. The desired December 31, 2014, wax inventory is 2,100 pounds. If candle wax costs $4.10 per pound, determine the direct materials purchases budget for 2014.

Answer:


Pounds of wax required for production: 
Candles [(74,200 × 8 oz.) ÷ 16 oz.]………………………………………… 37,100 
Plus desired ending inventory, December 31, 2014…………………………   2,100 
Total………………………………………………………………………………… 39,200 
Less estimated beginning inventory, January 1, 2014………………………   2,500 
Total pounds to be purchased………………………………………………… 36,700 
Unit price (per lb.)…………………………………………………………………   $4.10 
Total direct materials to be purchased………………………………………… $150,470