Question

Ramos Co. provides the following sales forecast and production budget for the next four months:

	April		May		June		July
Sales (units)	670		750		700		770
Budgeted production (units)	610		740		710		710

The company plans for finished goods inventory of 290 units at the end of June. In addition, each finished unit requires 5 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 20% of next month’s production needs. Beginning direct materials inventory for April was 610 pounds. Direct materials cost $2 per pound. Each finished unit requires 0.50 hours of direct labor at the rate of $16 per hour. The company budgets variable overhead at the rate of $20 per direct labor hour and budgets fixed overhead of $9,700 per month.

Exercise 22-8 Manufacturing: Direct materials budget LO P1

Prepare a direct materials budget for April, May, and June.

RAMOS CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budget production (units)	610	740	710	units
Materials requirements per unit	5	5	5	lbs.
Materials needed for production (lbs.)	3,050	3,700	3,550	lbs.
Budgeted ending inventory (lbs.)
Total materials requirements (lbs.)
Beginning inventory (lbs.)				0
Materials to be purchased (lbs.)	0	0	0
Materials price per pound
Budgeted cost of direct materials purchases

Answer 1

RAMOS CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budget production (units)	610	740	710	units
Materials requirements per unit	5	5	5	lbs.
Materials needed for production (lbs.)	3,050	3,700	3,550	lbs.
Budgeted ending inventory (lbs.)	740 (3,700*20%)	710 (3,550*20%)	710 (710*5*20%)	lbs.
Total materials requirements (lbs.)	3,790	4,410	4,260	lbs
Beginning inventory (lbs.)	(610)	(740)	(710)	lbs
Materials to be purchased (lbs.)	3,180	3,670	3,550
Materials price per pound	$2	$2	$2
Budgeted cost of direct materials purchases	$6,360	$7,340	$7,100