22-11 Anticipated sales for Safety Grip Company were 42000 passengers car tires

ID: 2500083 • Letter: 2

Question

22-11

Anticipated sales for Safety Grip Company were 42000 passengers car tires and 19000 truck tires. Rubber and steel belts are used in producing passenger car and truck tires as follows:

The purchase prices of rubber and steel are 1.20 and .80 per pound, respectively. The desired ending inventories of rubber and steel belts are 40000 and 10000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 46000 and 8000 pounds, respectively.

Prepare a direct materials purchases budget for Safety Grip Company for the year ended in December 31, 2016.

Passenger Car Truck Rubber 35 lbs per unit 78 lbs per unit Steel Belts 5 lbs per unit 8 lbs per unit

Explanation / Answer

Safety Grip Company

Direct Material Purchase Budget for the Year ended 31st December 2016

Rubber

Steel Belts

Units Required for Production

Passenger Car Tyres (42000*lbs)

1470000lbs

210000lbs

Truck Tyres(19000*lbs)

1482000lbs

152000lbs

Plus Desired Ending Inventories

40000lbs

10000lbs

Total

2992000lbs

372000lbs

Less Estimated Beginning Inventories

46000lbs

8000lbs

Total Units to be Purchased

2946000lbs

364000lbs

Unit Price

$1.2

$.8

Total Direct material Purchases

$3535200

$291200