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

Question

DeWitt Industries has adopted the following production budget for the first 4 months of 2017. Month Units Month Units January 10,110 March 5,390 February 8,370 April 4,140 Each unit requires 5 pounds of raw materials costing $2 per pound. On December 31, 2016, the ending raw materials inventory was 10,110 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

Jan Feb Mar Units 10110 8370 5390 Raw Material per Unit 5 5 5 Raw Materila Required 50550 41850 26950 Ending Raw Material Inventory 8370 5390 4140 Opening Raw Material Inventory 10110 8370 5390 Raw Material Purchase 48810 38870 25700 Cost per pound of Raw Material 2 2 2 Raw Material Purchase Budget 97620 77740 51400

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