Dallas Industries has adopted the following production budget for the first 4 mo

Question

Dallas Industries has adopted the following production budget for the first 4 months of 2014.

Dallas Industries has adopted the following production budget for the first 4 months of 2014. Each unit requires 5 pounds of raw materials costing $4 per pound. On December 31, 2013, the ending raw materials inventory was 9,220 pounds. Management wants to have a raw materials inventory at the end of the month equal to 20% of next month's production requirements. Prepare a direct materials purchases budget by month for the first quarter.

Explanation / Answer

For the production of each unit 5 pounds of RM at the cost of $4 per pound is given

Dallas Industries

Direct Material Purchase Budget

For the quater ending March31 2014

Particulars January February March 2014 Budgeted production in Units 10,150 8,440 5,490 24,080 X Direct Material (DM) required per unit (lb) 5.00 5.00 5.00 5.00 (DM) required for production (lb) 50,750 42,200 27,450 120400 + budgeted ending DM 10,150 8,440 5,490 5,490 =Total Units required 60,900 50,640 32,940 -beginning direct material -9,220 -10,150 -5490 -9220 =budgeted DM purchases 51,680 40,490 27,450 119,620 Cost per pound $4 $4 $4 Budgeted DM purchases $206,720 $161,960 $109,800 478,480

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