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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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I just need to know what the direct materials cost per ounce value is please

Transcribed Image Text:Luther, Inc. manufactures model airplane kits and projects production at 200, 450, 500, and 800 kits for
the next four quarters.
Direct materials are 7 ounces of plastic per kit and the plastic costs $5 per ounce.
Indirect materials are considered insignificant and are not included in the budgeting
process. Beginning Raw Materials Inventory is 860 ounces, and the company
desires to end each quarter with 20% of the materials needed for the next quarter's
production. Luther desires a balance of 230 ounces in Raw Materials Inventory at
the end of the fourth quarter. Each kit requires 0.25 hours of direct labor at an
average cost of $20 per hour. Manufacturing overhead is allocated using direct
labor hours as the allocation base. Variable overhead is $0.25 per kit, and fixed
overhead is $125 per quarter.
Luther, Inc.
Direct Materials Budget
For the Year Ended December 31
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total
Budgeted kits to be produced
200
450
500
800
1950
Direct materials (ounces) per kit
7
7
7
7
Direct materials needed for production
1400
3150
3500
5600
13650
Plus: Desired direct materials in ending inventory
630
700
1120
230
230
Total direct materials needed
2030
3850
4620
5830
13880
Less: Direct materials in beginning inventory
860
630
700
1120
860
Budgeted purchases of direct materials
1170
3220
3920
4710
13020
Direct materials cost per ounce
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