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Question 3: Brown Company manufactures wood tables. Each table requires 15 board-feet of wood. Wood costs...

Question 3:

Brown Company manufactures wood tables. Each table requires 15 board-feet of wood. Wood costs $6 per board foot. The company had 2,000 board feet wood on hand at the beginning of July and required enough wood inventory to be on hand to meet 20% of the following month’s production requirements.

July

August

September

Quarter

Required Production

5,000

7,000

10,000

22,000

The company expects to produce 8,000 units in October.

Required:

Prepare a materials purchases budget for the quarter. Provide both the number of board feet, and dollar value of inventory to be purchased.

Business   Accounting   
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Answer #1

Direct material purchase budget

July August September Quarter
Required production 5000 7000 10000 22000
Raw material per unit 15 15 15 15
Raw material needed for production 75000 105000 150000 330000
Add: Desired ending inventory 21000 30000 24000 24000
Total 96000 135000 174000 354000
Less: Beginning inventory -2000 -21000 -30000 -2000
Direct material purchase 94000 114000 144000 352000
Cost per foot 6 6 6 6
Direct material purchase cost 564000 684000 864000 2112000
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