Van Kirk Manufacturing Company has been in business for many years. Dottie Van Kirk, the company president, is concerned that the cost of raw material is skyrocketing. The production foreman assured Van Kirk that the use of direct material actually dropped in 2005.

Van Kirk has engaged your services to provide insight into what she thinks may be a sizable problem. Not only does it seem that the cost of direct material is increasing, but it also seems that her production foreman is being less than honest with her.

Required: Examine the information presented and write a brief report to Dottie Van Kirk detailing your findings relative to her concerns.

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The following information is available: Van Kirk Manufacturing Company Direct Materials Schedule For the Year Ending December 31, 2004 Beginning Direct Material Inventory Purchases During 2004 Materials Available During 2004 Ending Direct Material Inventory Direct Materials Used During 2004 Van Kirk Manufacturing Company Direct Materials Schedule For the Year Ending December 31, 2005 Beginning Direct Material Inventory Purchases During 2005 Materials Available During 2005 Ending Direct Material Inventory Direct Materials Used During 2005 $ 25,000 435,000 $460,000 (30,000) $430,000 $ 30,000 501,000 $531,000 (103,000) $428,000