A bakery produces sourdough bread. It takes 0.66 kilograms of material to produce each loaf of bread. The business purchases materials for $7.18 per kilogram. The production budget for the quarter is as follows: January February March Production budget (units) 760 767 643 Assuming there is no opening or closing inventory, what is the Direct Materials budget for January? (please enter your response to two decimal places)
Question
A bakery produces sourdough bread. It takes 0.66 kilograms of material to produce each loaf of bread. The business purchases materials for $7.18 per kilogram.
The production budget for the quarter is as follows:
January February March Production budget (units) 760 767 643 Assuming there is no opening or closing inventory, what is the Direct Materials budget for January? (please enter your response to two decimal places)
Solution
To calculate the Direct Materials budget for January, we need to follow these steps:
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First, we need to find out how much material is needed to produce the budgeted units for January. We do this by multiplying the number of units (760) by the amount of material needed for each unit (0.66 kg).
760 units * 0.66 kg/unit = 501.6 kg
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Next, we need to find out how much it costs to purchase this amount of material. We do this by multiplying the amount of material (501.6 kg) by the cost per kilogram ($7.18).
501.6 kg * 3601.488
So, the Direct Materials budget for January is $3601.49 (rounded to two decimal places).
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