Question

Marcy Jones, Bonita & Hill Fabricators' purchasing manager, has just received the company's production budget for the first quarter.

		January		February			March			Quarter
Budgeted Production		19,064		34,069			30,189			83,322

Budgeted sales of April is 25,810 and its beginning inventory is 4,646. May month budgeted sales is 20,470. Company policy requires an ending finished goods inventory each month that will meet 18% of the following month’s sales volume.

Each brick requires 4.00 pounds of clay, and Marcy expects to pay $0.36 per pound of clay in the coming year. Company policy requires an ending direct materials inventory each month that will meet 9% of the following month's production needs. Marcy expects to have 16,821 pounds of clay at a cost of $6,728 in inventory at the beginning of the year.

Prepare Bonita & Hill's direct materials purchases budget for the first quarter. (Round answers to 0 decimal places, e.g. 5,275 and enter price per pound to 2 decimal places, e.g. 52.75.)

Answer 1

Direct Materials Purchases Budget for the First Quarter

	January	February	March	Quarter
Budgeted Production	19,064	34,069	30,189	83,322
Standard pounds per unit	4	4	4	4
Production needs	76,256	136,276	120,756	333,288
	(19064 x 4)	(34069 x 4)	(30189 x 4)
Budgeted ending inventory	12,265	10,868	8,946(Note 1)	8,946
(9% of next month production needs)	(136276 x 9%)	(120756 x 9%)	(99396x9%)
Total Direct Material required (pounds)	88,251	147,144	129,702	342,234
(Production needs+Budgeted ending inventory)	(76256+12265)	(136276+10868)	(120756+8946)
Beginning Inventory	16,821	12,265	10,868	16,821
Budgeted purchases	71,430	134,879	118,834	325,413
(Direct material required-Beginning Inventory)	(88251-16821)	(147144-12265)	(129702-10868)
Standard cost per pound	$0.36	$0.36	$0.36	$0.36
Budgeted purchases cost	$25,715	$48,556	$42,780	$117,051
(Budgeted purchasesxStandard cost per pound)	(71430x0.36)	(134879x0.36)	(118834x0.36)

Note 1

Budgeted Sales in April = 25810 units

Budgeted beginning finished goods inventory of April = 4646 units

Budgeted ending finished goods inventory of April = 18% of next month sales volume

=18% x 20470

=3685 units

Budgeted production in April =Budgeted Sales+Closing inventory-Opening Inventory

=25810+3685-4646 units

=24849 units

Budgeted production needs of Direct Material in April = 24849 x 4

=99396 pounds