Required information Use the following information for the Exercises below. Ruiz

Question

Required information Use the following information for the Exercises below. Ruiz Co. provides the following sales forecast for the next four months: April May June July Sales (units) 570 650 600 690 The company wants to end each month with ending finished goods inventory equal to 40% of next month's forecasted sales. Finished goods inventory on April 1 is 228 units. Assume July's budgeted production is 600 units. In addition, each finished unit requires four pounds (lbs) of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month's production needs. Beginning raw materials inventory for April was 722 pounds. Assume direct materials cost $5 per pound. ercise 7-4 Manufacturing: Direct materials budget LO P1

Explanation / Answer

RUIZ CO.

Direct Materials Budget

For April, May, June

Ending finished goods inventory = 40% of the next month's forecasted sales.

Production = Current month sales + 40% of the next month's forecasted sales - Beginning finished goods inventory

April May June Production in units 602 [570+(650*40%)-228] 630 [650+(600*40%)-(650*40%)] 636 [600+(690*40%)-(600*40%)] Materials per unit 4 4 4 Materials needed for production (lbs) 2,408 (602*4) 2,520 (630*4) 2,544 (636*4) 2,400 (600*4) Ending materials 756 (2,520*30%) 763 (2,544*30%) 720 (2,400*30%) Total materilas requirements (lbs) 3,164 (2,408+756) 3,283 (2,520+763) 3,264 (2,544+720) Beginning materials 722 756 (2,520*30%) 763 (2,544*30%) Materials to be purchased (lbs) 2,442 (3,164-722) 2,527 (3,283-756) 2,501 (3,264-763) Materials cost per lb 5 5 5 Total budgeted direct materials cost 12,210 (2,442*5) 12,635 (2,527*5) 12,505 (2,501*5)

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