Zortek Corp. budgets production of 400 units in January and 200 units in Februar

Question

Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month's ending inventory of raw materials should be 40% of the following month's budgeted production. The January 1 raw materials inventory has 130 pounds of Z. Prepare a direct materials budget for January. ZORTEK CORP Direct Materials Budget For Month Ended January 31 Budget production (units) Materials needed for production (bs ) Total materials requirements (bs.) Materiais to be purchased (lbs.) Total cost of direct materials purchases unts bs lbs. bs. lbs. ibs bs per b

Explanation / Answer

Prepare direct material budget for january :

Budgeted production (units) 400 raw material per unit 5 Materials needed for production (lbs) 2000 Add: Desired ending inventory (200*5*40%) 400 Total materials requirement (lbs) 2400 Less: Beginning inventory (130) Materials to be purchased (lbs) 2270 Rate per pound 2 Total cost of direct material purchases 4540

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