Soster makes and sells candles. Each candle uses 0.6 kilograms of wax. Budgeted

Question

Soster makes and sells candles. Each candle uses 0.6 kilograms of wax. Budgeted production of candles in units for the next five months is as follows:

16,000

The company wants to maintain monthly ending inventories of wax equal to 25% of the following month's budgeted production needs. There were 1,300 kilograms of wax on hand on March 31 and 900 kilograms at March 1. The cost of wax is $0.75 per kilogram. Soster pays 45% of merchandise purchases in the month purchased and 55% in the following month.

Instructions:  

a. Prepare a direct materials purchases budget for the April.

b. Determine how much cash will be paid for purchases during April?

March April May June July Budgeted Production 20,000 17,000 18,000 15,000

16,000

Explanation / Answer

a. Prepare a direct materials purchases budget for the April:

b. Determine how much cash will be paid for purchases during April:

April March Budgeted Production 17,000 20,000 wax required per unit 0.6 kilograms 0.6 Wax required for budgeted production 10,200 12,000 Add: Ending inventory required
(18,000 x 0.6 x 25%) 2,700 1,300 Less: Beginning inventory (1,300) (900) Total wax to be purchased 11,600 12,400 Cost of wax per kilogram $0.75 $0.75 Direct materials purchases budget $8,700 $9,300

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