Walt ’ s Whistles manufactures referee whistles.
At the end of February, Walt ’ s has 2,000 pounds of steel for whistles in inventory.
Walt ’ s expects to produce and sell 50,000 whistles in March.
Each whistle requires a standard quantity of 0.2 pounds of steel.
Walt wants to have 5,000 pounds of steel in inventory at the end of March.
Walt ’ s has no whistles in beginning finished goods inventory and does not plan to have any whistles in ending finished goods inventory.
Each pound of steel has a standard cost of $7.00.
Prepare Walt ’ s purchase budget for steel in March.
How much does Walt ’ s expect to spend on steel in March?
Anticipated steel expenditure: $
To determine the anticipated steel expenditure for Walt's Whistles in March, we need to calculate the total pounds of steel needed and then multiply it by the standard cost per pound.
First, let's calculate the total pounds of steel needed for producing 50,000 whistles:
Total pounds of steel = Number of whistles * Steel requirement per whistle
Total pounds of steel = 50,000 whistles * 0.2 pounds of steel per whistle
Total pounds of steel = 10,000 pounds
Next, let's calculate the additional pounds of steel required to achieve the target ending inventory:
Additional pounds of steel required = Target ending inventory - Current ending inventory
Additional pounds of steel required = 5,000 pounds - 2,000 pounds
Additional pounds of steel required = 3,000 pounds
Now, let's calculate the total pounds of steel needed, considering both production and inventory requirements:
Total pounds of steel needed = Total pounds of steel + Additional pounds of steel required
Total pounds of steel needed = 10,000 pounds + 3,000 pounds
Total pounds of steel needed = 13,000 pounds
Finally, let's calculate the anticipated steel expenditure by multiplying the total pounds of steel needed by the standard cost per pound:
Anticipated steel expenditure = Total pounds of steel needed * Standard cost per pound
Anticipated steel expenditure = 13,000 pounds * $7.00 per pound
Anticipated steel expenditure = $91,000
Therefore, Walt's Whistles expects to spend $91,000 on steel in March.