Question

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	13,400		21,100

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	530	lb.	190	lb.	330	lb.
Desired inventory, September 30	560	lb.	180	lb.	360	lb.
Price per pound	$1.50		$2.50		$3.40

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

Direct material purchase budget is prepared after production budget

	Dough	Tomato	Cheese	Total
units required for production
12"pizza	10,720(13,400*0.8)	6,700(13,400*0.50)	9,380(13,400*0.7)	26,800 [10,720+6,700+9,380]
16''Pizza	31,650(21,100*1.5)	14,770(21,100*0.7)	27,430(21,100*1.30)	73,850
Add: desired Ending inventory September 30	560	180	360	1,100
Total pounds required	42,930 [10,720+31,650+560]	21,650 [6,700+14,770+180]	37,170[9,380+27,430+360]	101,750
Less: estimated inventory September,1	530	190	330	1,050
Total pounds To be purchased (A)	42,400[42,930-530]	21,460[21,650-190]	36,840[37,170-330]	100,700
Unit price per pound (B)	$1.50	$2.50	$3.40
Total AXB	$63,600[42,400*$1.50]	$53,650[21,460*$2.50]	$125,256[36,840*$3.40]	$242,506

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