Moreno industries has adopted the following production budgetfor the first 4 mon

Question

Moreno industries has adopted the following production budgetfor the first 4 months                 Month                                    Units                   January                                 10,000                   February                                 8,000                   March                                    5,000                   April                                       4,000 Each unit requires 3 pounds of raw materials costing $2 perpound. On December 31, 2008, the ending raw materials inventory was9,000 pounds. Management wants to have a raw materials inventory atthe end of the month equal to 30% of next months productionrequirements. Instructions: Prepare a direct material purchase budget by month for thefirst quarter Moreno industries has adopted the following production budgetfor the first 4 months                 Month                                    Units                   January                                 10,000                   February                                 8,000                   March                                    5,000                   April                                       4,000 Each unit requires 3 pounds of raw materials costing $2 perpound. On December 31, 2008, the ending raw materials inventory was9,000 pounds. Management wants to have a raw materials inventory atthe end of the month equal to 30% of next months productionrequirements. Instructions: Prepare a direct material purchase budget by month for thefirst quarter

Explanation / Answer

                                     January            February March       April            Total production units     10,000               8,000            5,000               4,000 x pounds / unit       x3    x3    x3    x3 Total production needs   30,000               24,000          15,000             12,000 + desired ending raw    material-30% of    next month production 7,200    4,500    3,600                                                         37,200 28,500    18,600 -desired beginning    9,000    7,200 4,500 Total pounds of raw materials to be purchased28,200              21,300            14,100 * cost perpound                  x2                     x2    x2 Total cost ofd.mat           $56,400 42,600   28,200

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