Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct mater

Question

Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It plans production of 240,000 units in the second quarter and 52,500 units in the third quarter. Raw material inventory is 43,200 pounds at the beginning of the second quater. Other information is as follows:

Direct materials . . . . . . . . . . Each unit requires 0.60 pounds of a key raw material, priced at $ 175 per pound. The company plans to end each quarter with an ending inventory of materials equal to 30% of next quarter's budgeted materials requirements.

Prepare a direct materials budget for the second quarter.

Explanation / Answer

Direct Materials Budget for the second quarter

$ Raw Material required for production in pounds 240000x 0.60 144000 + Closing Inventory of Raw Material 52500x 0.60 x 30% 9450 - Opening Inventory of Raw Material -43200 Raw Material Purchase in Pounds 110250 Rate per pound $ 175 Raw Material Purchase in $ 19293750

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