Question

Direct Materials Purchases Budget

Lorenzo’s Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'' and 16'' frozen pizzas for September:

	Units
	12" Pizza		16" Pizza
Budgeted production volume	15,800		22,000

Three direct materials are used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:

		12" Pizza		16" Pizza
Direct materials:
	Dough	0.80	lb. per unit	1.50	lb. per unit
	Tomato	0.50		0.70
	Cheese	0.70		1.30

In addition, Lorenzo’s has determined the following information about each material:

	Dough		Tomato		Cheese
Estimated inventory, September 1	620	lb.	220	lb.	380	lb.
Desired inventory, September 30	650	lb.	210	lb.	410	lb.
Price per pound	$1.00		$2.40		$3.00

Prepare September's direct materials purchases budget for Lorenzo’s Frozen Pizza Inc. When required, enter unit prices to the nearest cent.

Lorenzo’s Frozen Pizza Inc.
Direct Materials Purchases Budget
For the Month Ending September 30
	Dough	Tomato	Cheese	Total
Units required for production:
12" pizza
16" pizza
Total pounds required
Total units to be purchased
Unit price	x $	x $	x $
Total direct materials to be purchased	$	$	$	$

Answer 1

Solution:

Lorenzo’s Frozen Pizza Inc. Direct Material Purchase Budget for the month ending september 30

	Dough	Tomato	Cheese	Total
Units required for production
12" pizza	12,640 (15800*0.8)	7,900 (15800*0.5)	11,060 (15800*0.7)
16" pizza	33,000 (22000*1.50)	15,400 (22000*0.7)	28,600 (22000*1.30)
Add: Desired inventory sept.30	650	210	410
Total pounds required	46,290	23,510	40,070
Less: Estimated inventory sep 1	620	220	380
Total units to be purchased	45,670	23,290	39,690
Unit price	1.00	2.40	3.00
Total direct material to be purchased	45,670	55,896	119,070	220,636