Exercise 20-5 Dallas Industries has adopted the following production budget for
ID: 2456882 • Letter: E
Question
Exercise 20-5
Dallas Industries has adopted the following production budget for the first 4 months of 2013.
Month
Units
Month
Units
Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2012, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 30% of next month’s production requirements.
Prepare a direct materials purchases budget by month for the first quarter.
DALLAS INDUSTRIES
Direct Materials Purchases Budget
For the Quarter Ending March 31, 2013
January
February
March
Open Show Work
Your answer is incorrect.Explanation / Answer
Answer:
Notes:
1) Total Purchase during the month = Production Units + Closing Inventory - Opening Inventory
2) Opening Inventory of January Month is given (i.e. 9000 Pounds closing inventory of December 2012)
3) Closing Inventory
January Month = 30% of Production February Month's Production Requriement = 30% x 24,000 = 7,200 Pounds
February Month = 30% of Production March Month's Production Requriement = 30% x 15,000 = 4,500 Pounds
March Month = 30% of Production April Month's Production Requriement = 30% x 4000 x 3 = 3,600 Pounds
4) Closing Inventory will become the opening inventory of next month.
Dallas Industries Direct Material Purchase Budget for the first quarter Particulars January February March A. Production Budget (Units) 10,000 8,000 5,000 B. Raw Material Requirement Per Unit (in Pounds) 3 3 3 C. Raw Material Requirement for Production (in Pounds) 30,000 24,000 15,000 D. Inventory at the ending of the month (Units) 7,200 4,500 3,600 E. Inventory at the beginning of the month (Units) 9,000 7,200 4,500 F. Total Purchased Quantity during the month (Units) (C+D-E) 28,200 21,300 14,100 G. Raw Material Cost Per Pound $2 $2 $2 H. Total Budgeted Cost for Purchase of Raw Material (F x G) $56,400 $42,600 $28,200Related Questions
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