Question

Your answer is partially correct. Try again. Dallas Industries has adopted the following production budget for the first 4 months of 2014. Month Units Month Units January 10,310 March 5,240 February 8,470 April 4,230 Each unit requires 5 pounds of raw materials costing $4 per pound. On December 31, 2013, the ending raw materials inventory was 9,170 pounds. Management wants to have a raw materials inventory at the end of the month equal to 20% of next month’s production requirements. Prepare a direct materials purchases budget by month for the first quarter.

Answer 1

Calculation of raw materials required for production

Particulars	January	February	March	April
Budgeted Production in units (a)	10,310	8,470	5,240	4,230
Raw material required per unit (b)	5 pounds	5 pounds	5 pounds	5 pounds
Total raw material required (c = a*b)	51,550	42,350	26,200	21,150
Desired Ending raw material inventory (20% of next month' raw material requirement)	8,470	5,240	4,230

Calculation of purchase of raw material   

Particulars	January	February	March
Raw material required (in pounds)	51,550	42,350	26,200
Add: Desired ending raw material inventory	8,470	5,240	4,230
Total material needed	60,020	47,590	30,430
Less: Beginning raw material inventory	(9,170)	(8,470)	(5,240)
Material required to be purchased (A)	50,850	39,120	25,190
Purchase cost per pound (B)	$4	$4	$4
Total Purchase Cost (A*B)	203,400	156,480	100,760