Dallas Industries has adopted the following production budget for the first 4 mo

Question

Dallas Industries has adopted the following production budget for the first 4 months of 2014. Month Units Month Units January 10,260 March 5,170 February 8,230 April 4,180 Each unit requires 5 pounds of raw materials costing $2 per pound. On December 31, 2013, the ending raw materials inventory was 9,330 pounds. Management wants to have a raw materials inventory at the end of the month equal to 20% of next month’s production requirements. Prepare a direct materials purchases budget by month for the first quarter.

Explanation / Answer

1 2 3 Total Units to produced (a) 10260 8230 5170 23660 Material required per unit   (b) 5 5 5 5 Total pounds required (a*b) 51300 41150 25850 118300 Ending inventory desired 8230   [41150*.2] 5170    [411509*.2] 4180    [4180*.2*5] 17580 Less:Beginning inventory -9330 - 8230 -5170 22730 Raw material to be purchased 50200 38090 24860 113150 Purchase cost [Purchase *2 ] 100400 76180 49720 226300

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