Question

Zira Co. reports the following production budget for the next four months.

	April		May		June		July
Production (units)	676		730		708		688

Each finished unit requires six pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 1,217 pounds. Assume direct materials cost $3 per pound.

Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Answer 1

Solution

ZIRA CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted production (units)	676	730	708
Materials requirements per unit	6	6	6
Materials needed for production (lbs.)	4056	4380	4248
Budgeted ending inventory (lbs.)	1314	1274	1238*
Total materials requirements (lbs.)	5370	5654	5486
Beginning inventory (lbs.)	-1217	-1314	-1274
Materials to be purchased (lbs.)	4153	4340	4212
Cost per lb.	$      3.00	$      3.00	$      3.00
Total budgeted direct materials cost	$    12,459	$    13,021	$    12,636

*688 x 6 x 30%