Exercise 22-13 Manufacturing: Direct materials budget LO P1 Electro Company budg

Question

Exercise 22-13 Manufacturing: Direct materials budget LO P1 Electro Company budgets production of 520,000 transmissions in the second quarter and 595,000 transmissions in the third quarter. Each transmission requires 0.8 pounds of a key raw material. Electro Company aims to end each quarter with an ending inventory of direct materials equal to 20% of next quarter's budgeted materials requirements. Beginning inventory of this raw material is 83,200 pounds. Direct materials cost $1.77 per pound. Prepare a direct materials budget for the second quarter. ELECTRO COMPANY Direct Materials Budget Second Quarter Budgeted production (units) 520,000 units Materials needed for production (lbs.) Total materials requirements (lbs.) Materials to be purchased (Ibs.) Budgeted cost of direct materials purchases

Explanation / Answer

Direct material budget :

Budgeted production (units) 520000 Raw material per unit 0.80 Materials needed for production (lbs.) 416000 Add: Desired ending inventory (595000*.8*20%) 95200 Total needs 511200 Less: Beginning inventory (83200) Materials to be purchased (lbs.) 428000 Cost per pound 1.77 Budgeted cost of direct materials purchase 757560

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