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, its 5,330 4,120 Month January February 10,110 March 8,130 April Each unit requires 5 pounds of raw materials costing $3 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 mateñials purchases budget by month for the first quarter

Explanation / Answer

Direct material budget

January February march Production units 10110 8130 5330 Raw material per unit 5 5 5 Raw material for production 50550 40650 26650 Add: Desired ending inventory 8130 5330 4120 Total needs 58680 45980 30770 Less: beginning inventory (10110) (8130) (5330) Raw material purchase 48570 37850 25440 Cost per pound 3 3 3 Raw material purchase cost 145710 113550 76320

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