Noche Building Blocks is preparing its budget for 2008. Production for the first

Question

Noche Building Blocks is preparing its budget for 2008. Production for the first quarter will be 600,000 blocks. Production for the subsequent quarters will be 625,000 blocks, 700,000 blocks, and 850,000 blocks.

Each block requires 3.0 pounds of the raw material, blockrock, and each pound of blockrock costs $0.50. Noche Building Blocks will have 325,000 pounds of blockrock on hand at the end of 2007 and wants to have 500,000 pounds of blockrock in inventory at the end of 2008. Ending inventory for blockrock for the first, second, and third quarters will be 340,000 pounds, 360,000 pounds and 450,000 pounds.

Prepare the direct materials budget by quarter and in total for the year 2008.

Please Show All Steps. Thank You.

Explanation / Answer

First Second Third Fourth Year Production 600000 625000 700000 850000 2775000 Pounds per block 3 3 3 3 3 Pounds required for production 1800000 1875000 2100000 2550000 8325000 Add: Desired ending inventory 340000 360000 450000 500000 500000 Total requirements 2140000 2235000 2550000 3050000 8825000 Less: Beginning inventory 325000 340000 360000 450000 325000 Required purchases 1815000 1895000 2190000 2600000 8500000 Cost per pounds 0.5 0.5 0.5 0.5 0.5 Cost of purchases 907500 947500 1095000 1300000 4250000

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