Woodsman Inc. produces a variety of wood finishing products including litres of varnish that it manufactures and packages under its own name.

Woodsman Inc. produces a variety of wood finishing products including litres of varnish that it manufactures and packages under its own name. The company has computed the required production of litres of varnish it will need for the first three months of 2017 as follows:

January         300 000 litres

February       340 000 litres

March            400 000 litres

Each litre of varnish requires 10 grams of a special chemical. This chemical costs $.35 per gram. The company has determined that it needs 20 per cent of next month’s raw material needs on hand at the end of each month.

The cost of the direct material that should be purchased in February is:

$880 000

$920 000

$950 000

$1 232 000

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