Question

The following information is from the manufacturing budget and the budgeted financial statements of Fabor Fabrication.

Direct materials inventory, January 1	$	68,000
Direct materials inventory, December 31		155,000
Direct materials budgeted for use during the year		360,000
Accounts payable to suppliers of materials, January 1		50,000
Accounts payable to suppliers of materials, December 31		79,000

a. Compute the budgeted amount for purchases of direct materials during the year.

b. Compute the budgeted amount for cash payments during the year to suppliers of materials

Answer 1

(a). Budgeted amount for purchases of direct materials = $447,000

Explanation;

Budgeted amount for purchases of direct materials will be calculated as follow;

Direct materials inventory, December 31	$155,000
Add: Direct materials budgeted for use during the year	$360,000
Less: Direct materials inventory, January 1	($68,000)
Budgeted amount for purchases of direct materials	$447,000

(b). Budgeted amount for cash payments during the year = $418,000

Explanation;

Budgeted amount for purchases of direct materials will be calculated as follow;

Budgeted amount for purchases of direct materials	$447,000
Add: Accounts payable to suppliers of materials, January 1	$50,000
Less: Accounts payable to suppliers of materials, December 31	($79,000)
Budgeted amount for cash payments during the year	$418,000