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The Finley Company plans to produce 25,000 units during July. It plans to sell 26,000 units in July. Each unit of finished product requires 2 pounds of direct material X. This direct material costs $4 per pound. The July 1 inventory of X is 2,000 pounds, and the desired July 31 inventory of X is 1,000 pounds. The cost of material X purchases in July is planned to be: Group of answer choices

Answer :

The cost of the material X purchased in July should be $196,000.

  • The cost of material X purchased be:

Material required for production (25,000 units × 2 pound per unit) 50,000 pounds

Add: Desired closing inventory 1,000 pounds

Total requirement 51,000 pounds

Less: Opening inventory - 2,000 pounds

Material to be purchased 49,000 pounds

Multiply with Cost of material $4 per pound

Total cost of purchases $196,000

Therefore we can conclude that the cost of the material X purchased in July should be $196,000.

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