Question

Perine Company has 3,960 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,400 and 6,000 units, respectively. 3 pounds of raw materials are needed for each unit, and the estimated cost per pound is $9. Management desires an ending inventory equal to 30% of next month’s materials requirements.

Required:

Prepare the direct materials budget for January.

Answer 1

Answer and Explanation:

The Preparation of direct materials budget for January is shown below:-

Direct materials budget

For the month of January, 2020

Production 4,400

Material per unit 3

Raw material required for production 13,200

(4,400 × 3)

Add: Ending raw material inventory 5,400

(6,000 × 3 × 30%)

Raw material required 18,600

Less : Beginning raw material inventory (3,960 )

Raw material purchases 14,640

Cost per pound $9

Cost of raw material purchases $131,760

(14,640 $ $9)

Therefore we have added the ending raw material inventory, raw material and deducted the Beginning raw material inventory and after getting the raw material we multiply the cost per pound to reach the cost of raw material purchases.