Direct Materials Purchases Budget A). Lorenzo’s Frozen Pizza Inc. has determined

Question

Direct Materials Purchases Budget

A). Lorenzo’s Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'' and 16'' frozen pizzas for September:

Three direct materials are used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:

In addition, Lorenzo’s has determined the following information about each material:

Prepare September's direct materials purchases budget for Lorenzo’s Frozen Pizza Inc. When required, enter unit prices to the nearest cent.

B). Lorenzo’s Frozen Pizza Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows:

Depreciation, insurance, and property taxes represent $31,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. 65% of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.

Prepare a schedule indicating cash payments for selling and administrative expenses for March, April, and May.

Explanation / Answer

A. Lorenzo’s Frozen Pizza Inc. Direct Materials Purchases Budget For the Month Ending September 30 Dough Tomato Cheese Total Units required for production:(WN-1) a.12" pizza 12800 8000 11200 32000 b.16" pizza 38250 17850 33150 89250 c.Plus desired inventory, September 30 530 240 270 1040 d.Total pounds required(a+b+c) 51580 26090 44620 122290 e.Less estimated inventory, September 1 560 230 300 1090 f.Total units to be purchased(d-e) 51020 25860 44320 121200 Unit price $1.00 $2.80 $3.30 7.1 Total direct materials to be purchased $51,020.00 $72,408.00 $146,256.00 269684 WN-1 Calculation of Units required for production Budgeted Production Volume 12'' Pizza = 16000 16'' Pizza = 25500 Particulars Dough Tomato Cheese Dough Tomato Cheese a. Direct Materials required per unit 0.8 0.5 0.7 1.5 0.7 1.3 b. No.of Units to be produced 16000 16000 16000 25500 25500 25500 c. Direct Materials Required(a*b) 12800 8000 11200 38250 17850 33150 B. Particulars March April May a.Selling and Administrative Expenses 144900 136200 123900 b.Less - Depn,Insurance and Property Taxes 31000 31000 31000 c.Remainder of Expenses 113900 105200 92900 d.65% paid in Month Incurred(c*65%) 74035 68380 60385 e.35% paid in following month(c*35%) 39865 36820 32515 Lorenzo’s Frozen Pizza Inc. Schedule of Cash Payments for Selling and Administrative Expenses For the Three Months Ending May 31 March April May March expenses: Paid in March 74035 Paid in April 39865 April expenses: Paid in April 68380 Paid in May 36820 May expenses: Paid in May 60385 Total cash payments 74035 108245 97205 Out of 31000 incurred insurance premium paid in Feb 28 hence it will not come in above schedule and depreciation is an non cash expense and property taxes paid in june hence this also will not come in above schedule

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