Question

Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 19 ounces of plastic costing $0.08 per ounce. Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows:

	Units
July	3,500
August	4,400
September	4,900
October	6,300

Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 30% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy.

Required:

Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total. If required, round the total purchase cost to nearest whole value.

Langer Company
Direct Materials Purchases Budget
For July, August and September
	July	August	September	Total
Units to be produced
Direct materials per unit (ounces)
Production needs
Desired ending inventory (ounces)
Total needs
Less: Beginning inventory
Direct materials to be purchased (ounces)
Cost per ounce	$0.08	$0.08	$0.08	$0.08
Total purchase cost	$	$	$	$

Answer 1

Solution:

Direct Materials Purchase Budget - Langer Company
Particulars	July	August	September	Total
Budgeted Production Units	3500	4400	4900	12800
Material needed per unit (In ounces)	19	19	19	19
Material needed for budgeted production	66500	83600	93100	243200
Add: Budgeted ending inventory (30% of next month material requirements)	25080	27930	35910	35910
Total material requirements	91580	111530	129010	279110
Less: Beginning inventory	19950	25080	27930	19950
Materials to be purchased (Ounces)	71630	86450	101080	259160
Cost per Ounces	$0.08	$0.08	$0.08	$0.08
Total purchase costs	$5,730.40	$6,916.00	$8,086.40	$20,732.80