Calculate Orr Companys budgeted direct material inventory

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Question - Orr Company makes and sells a single product. The company is in the process of preparing a direct materials purchases budget and has provided the following information:

1. It takes five yards of direct materials to produce one unit of this product.

2. Direct materials cost $2 per yard to purchase.

3. 61,000 units are budgeted to be produced in February and 59,000 units are budgeted to be produced in March.

4. Orr Company wants to maintain monthly ending inventories of direct materials equal to 20% of the next month's production needs.

5. Orr Company pays for 70% of a month's purchase of direct materials in the month of purchase and the other 30% is paid in the following month.

Required - Calculate Orr Company's budgeted direct material inventory balance reported in the February 28 pro forma balance sheet.

Reference no: EM132525580

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