Dewitt Industries has adopted the following production budget for the first four

Question

Dewitt Industries has adopted the following production budget for the first four months of 2012.

Months: Units:
January 11000
February 7800
March 5400
April 4400

Each unit requires two pounds of raw material costing $3 per pound. On December 31, 2011, the ending raw materials inventory was 7260 pounds. Management wants to have a raw materials inventory at the end of the month equal to 33% of next month's production requirements.

Directions:
Use all necessary numbers to complete problem. Complete a direct materials purchase budget by month for EACH quarter. (Enter all amounts as positive amounts and subtract where necessary.)

Explanation / Answer

January

February

March

April

1 Quarter

January

February

March

April

1 Quarter

Production in units 11000 7800 5400 4400 24200 In pounds (Units * 2) 22000 15600 10800 8800 48400 Desired ending inventory 33% in next Month 5148 3564 2904 11616 Total 27148 19164 13704 60016 Less: Opening inventory 7260 5148 3564 15972 Required purchase 19888 14016 10140 44044 Purchase cost (purchase pounds * $3) $59,664 $42,048 $30,420 $132,132

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