56. CSO: 1A4a LOS: 1A4i
Stevens Company manufactures electronic components used in automobile
manufacturing. Each component uses two raw materials, Geo and Clio. Standard usage
of the two materials required to produce one finished electronic component, as well as the
current inventory, are shown below.
Standard
Material Per Unit Price Current Inventory
Geo 2.0 pounds $15/lb. 5,000 pounds
Clio 1.5 pounds $10/lb. 7,500 pounds
Stevens forecasts sales of 20,000 components for the next two production periods.
Company policy dictates that 25% of the raw materials needed to produce the next
period’s projected sales be maintained in ending direct materials inventory.
Based on this information, the budgeted direct material purchases for the coming period
would be
Geo Clio
a. $450,000 $450,000.
b. $675,000 $300,000.
c. $675,000 $400,000.
d. $825,000 $450,000.
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