Question

Beridze Manufacturing expects to produce 2,100 units in January and 3,000 units in February. Beridze budgets $20 per unit for direct materials. The amount of indirect materials needed for production has been determined to be insignificant and will therefore not be considered in the calculation. The balance in the Raw Materials Inventory account​ (all direct​ materials) on January 1 is $37,350. Beridze desires the ending balance in Raw Materials Inventory to be 60​% of the next​ month's direct materials needed for production. Desired ending balance for February is $50,500.What is the cost of budgeted purchases of direct materials needed for​ January?

Answer 1

Purchase Budget For January
Production units	2,100
Direct materials cost per unit	$20
Direct materials needed for production	$42,000
Ending inventory of direct materials	36,000
Total direct materials needed	$78,000
Beginning inventory of direct materials	-37,350
Budgeted purchases	$40,650

February production = 3,000 units

Direct materials cost per unit = $20

Direct materials cost for February production = February production x Direct materials cost per unit

= 3,000 x 20

= 60,000

Ending inventory of direct materials for January = Direct materials cost for February production x 60%

= 60,000 x 60%

= 36,000

Cost of budgeted purchases of direct materials needed for​ January = $40,650