A company manufactures a product using one material per unit. The following information for the upcoming budget year is available:
Number of units sold14,500
Budgeted beginning finished goods inventory units1,500
Budgeted ending finished goods inventory units3,000
Budgeted beginning direct materials inventory units2,000
Budgeted ending direct materials inventory units1,500
Direct manufacturing material cost per unit$5
What amount is the total direct materials purchasing budget?
The company would produce 16,000 finished units, 14,500 to sell and 1,500 more to increase the finished goods inventory from 1,500 to 3,000 units. They would have to purchase 16,000 units of material, except that the raw material inventory declines by 500 units, from 2,000 units to 1,500 units therefore they will only purchase 15,500 units. At a cost of $5 per unit the 15,500 units will cost $77,500.