Answer:
Total cost= $3,121.5
Explanation:
Giving the following information:
Sunrise Poles manufacture hiking poles and is planning on producing 4,000 units in March and 3,700 in April. Each pole requires a half-pound of material, which costs $1.20 per pound. The company's policy is to have enough material on hand to equal 10% of the next month's production needs and to maintain a finished goods inventory equal to 25% of the next month's production needs.
We need to calculate the production required for March:
Sales of March= 4,000 units
Ending inventory= (3,700*0.25)= 925 units
Now, we can calculate the material required:
Direct material:
For March= 4925*0.5= 2,462.5 pounds
Ending inventory= (2,775 units*0.5)*0.1= 138.75 pounds
Total= 2,601.25 pounds
Total cost= 2,601.25*$1.20= $3,121.5
