A farm company manufactures and sells a pesticide called snare. The following da

Question

A farm company manufactures and sells a pesticide called snare. The following data are avail for preparing budgets for snare for the 1st two quarters of 2013 (I'm stuck on this part).

Direct materials: Each bag of Snare requires 5 pounds of Gumm at a cost of $4 per pound and 8 pounds of Tarr at $1.50 per pound.  The direct materials budget for Tarr shows the cost of Tarr purchases to be $298000 in 1st Q, and $427,000 in 2nd Q.

Types of inventory 1st Q     2nd Q      3rd Q
Snare                     8400     12200      18200
Gumm (lbs)            9200      10300      13100
Tarr (lbs)              14200     20400       25400

The required production units are: 1st Quarter, 32300 and 2nd Quarter, 49500.

My question is how do i find the direct materials per unit in the direct materials budget?

Explanation / Answer

direct material : per unit price of the gumm, tarr and a bag of snare
unit cost of gumm = $4 per unit
unit cost of tarr = $ 1.5 per unit
since each bag of snare require 5 pounds of gum at $ 4 per pound
and 8 pounds of the tarr at $1.5 per pound

so cost of each bag of snare= 5*4+8*1.5
= $ 32 per snare bag.

For 1 st Q
budget for tarr =$ 298,000
units of tarr=budget/ per unit cost=298000/1.5 =198,666.67 pounds
so we can produce 198,666.67 pounds of tarr from the given budget

For 2 nd Q
budget for tarr =$ 427,000
units of tarr=427,000/1.5 =284,666.67 pounds
so we can produce 284,666.67 pounds of tarr from the given budget


Now for the 1 st Q we require 32300 units of snare bag.
require amount of snare= demand- inventory 1 st Q+ inventory 2 nd Q
=32300-8400+12200
= 36100
so direct material require
gumm= 36100*5=180,500 pounds
net amount of gumm require = require- inventory 1 st Q +inventory 2 nd Q
= 180500- 9200 +10300 =109,600 pounds
tarr=36100*8 = 288,800 pounds
net amt. require = require- inventory 1 st Q +inventory 2 nd Q
=288800- 14200+20400=295,000 pounds

Now for the second 2 nd Q we require 59500 units
require amount of snare bag = demand -inventory 2nd Q +inventory 3rd Q
=59500-12200+18200= 65500 units of snare bag
so direct material require
gumm =65500*5 = 327,500 pounds
net gumm =require - inventory 2 nd Q +inventory 3 rd Q
= 327500- 10300 + 13100
=330,300 pounds
tarr =65500*8 = 524,000 pounds
net tarr =require - inventory 2 nd Q +inventory 3 rd Q
= 524000- 20400 +25400
=529,000 pounds

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