Ruiz Co. provides the following sales forecast for the next four months: The com
ID: 2514410 • Letter: R
Question
Ruiz Co. provides the following sales forecast for the next four months:
The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on April 1 is 204 units. Assume July's budgeted production is 710 units. In addition, each finished unit requires six pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month’s production needs. Beginning raw materials inventory for April was 1,690 pounds. Assume direct materials cost $5 per pound
Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
April May June July Sales (units) 680 760 710 800
Explanation / Answer
RUIZ CO. Production Budget For April, May, and June April May June Sales (units) 680 760 710 Add: Budgeted ending inventory (units) 760 x 30% = 228 710 x 30% = 213 800 x 30% = 240 Less: Budgeted beginning inventory (units) 204 228 213 Units to be produced 704 745 737 RUIZ CO. Direct Materials Budget For April, May, and June April May June Units to be produced 704 745 737 Perunit required materials 6 6 6 Materials needed for production (lbs.) 4,224 4,470 4,422 Add: Ending inventory 4,470 x 40% = 1,788 4,422 x 40% = 1,768 710 x 6 x 40% = 1,704 Total materials requirements (lbs.) 6,012 6,239 6,126 Less: Beginning inventory 1,690 1,788 1,768 Materials to be purchased (lbs.) 4,322 4,451 4,358 Material cost per lbs. $5 $5 $5 Total budgeted direct materials cost $21,610 $22,254 $21,790
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