Horton Company produces and sells two products: round and square tables. In August 20x0, the budget projected the following for 20x1:
The tables are manufactured using the following direct materials:

Budgeted data for 20x1 direct materials are:

Budgeted data for 20x1 Direct labour and overhead are:

The cost of purchases for direct material P for 20x1 is:
A)$2,805,000
B)$2,720,000
C)$2,635,000
D)$2,550,000

Question

Horton Company produces and sells two products: round and square tables. In August 20x0, the budget projected the following for 20x1: 
The tables are manufactured using the following direct materials:

Budgeted data for 20x1 direct materials are:

Budgeted data for 20x1 Direct labour and overhead are:

The cost of purchases for direct material P for 20x1 is:
A)$2,805,000 
B)$2,720,000 
C)$2,635,000 
D)$2,550,000

Quizplus · Accepted Answer

To calculate the cost of purchases for direct material P, we need to multiply the amount of direct material P required per unit by the total number of units to be produced (as per the budget) and then multiply that by the cost per unit of direct material P. 
Direct material P required per unit of round table = 6 feet
Direct material P required per unit of square table = 8 feet
Total direct material P required for round tables = 25000 x 6 = 150000 feet
Total direct material P required for square tables = 20000 x 8 = 160000 feet
Total direct material P required = 150000 + 160000 = 310000 feet
Cost per foot of direct material P = $8.50
Total cost of purchases for direct material P = 310000 x 8.50 = $2,635,000
Therefore, the best choice is C, which represents the cost of purchases for direct material P in 20x1.

Horton Company Produces and Sells Two Products: Round and Square