ABC Inc. manufactures bedding sets. The budgeted production is for 55,000 comforters in 2012. Each comforter requires 7 yards of material. So 385,000 yards will be needed. The estimated January 1, 2012, beginning inventory is $124,000 in material. The desired ending balance is $120,000 in material. If the material costs $4.00 per yard, determine the direct materials budget for 2012.

Total direct material cost= $1,536,000

Explanation:

Giving the following information:

So 385,000 yards will be needed.

The estimated January 1, 2012, beginning inventory is $124,000.

The desired ending balance is $120,000.

The material costs $4.00 per yard.

To determine the direct material budget, we need to use the following formula:

Purchases= production + desired ending inventory - beginning inventory

Direct material budget:

Production= 385,000*4= 1,540,000

Desired ending inventory= 120,000

Beginning inventory= (124,000)

Total direct material cost= $1,536,000

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