Berol Co. plans to sell 200,000 units of finished product in July 2020 and expects...
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Accounting
Berol Co. plans to sell 200,000 units of finished product in July 2020 and expects a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 160,000 finished units in inventory on June 30th.
Each unit of finished product requires four kilograms of direct materials at a cost of $1.02 per kilogram. There are 800,000 kg of direct materials in inventory on June 30, 2020.
Assume that Berol plans to produce 600,000 units of the finished product in the three-month period ending September 30, 2020, and plans to have direct materials inventory on hand at the end of the three-month period equal to 25% of the use in that period. Which of the following is the estimated cost of direct materials purchases for the three-month period ending September 30, 2020?
1. $3,350,000
2. $2,400,000
3. $2,640,000
4. $2,200,000
5. $2,880,000
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