X Company has 2000 pounds of raw material in its beginning i

X Company has 2,000 pounds of raw material in its beginning inventory. Its production budget shows required production of 4,000 units in January and 5,000 units in February. Three pounds of raw materials are needed for each unit produced and the projected cost of the raw material is $6 per pound. Management wants to each every month with raw material equal to 20% of the materials needed for the next month\'s production. Compute the cost (in dollars) of raw materials needed to be purchased in January.

Solution

Compute the cost (in dollars) of raw materials needed to be purchased in January.

Raw materials needed to be purchased in january = $78000