Question

Ruiz Co. provides the following sales forecast for the next four months:

   

	April		May		June		July
Sales (units)	620		700		650		740

The company wants to end each month with ending finished goods inventory equal to 40% of next month's forecasted sales. Finished goods inventory on April 1 is 248 units. Assume July's budgeted production is 650 units. In addition, each finished unit requires five pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 978 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.)

Answer 1

	Direct Materials Budget
	For April, May, and June
	April	May	June
Budgeted production (units)	652	680	686	units
Materials requirements per unit	5	5	5	lbs.
Materials needed for production(lbs.)	3260	3400	3430	lbs.
Budgeted ending inventory (lbs.)	1020	1029	975	lbs.
Total materials requirements(lbs.)	4280	4429	4405	lbs.
Beginning inventory (lbs.)	(978)	(1020)	(1029)	lbs.
Materials to be purchased(lbs.)	3302	3409	3376	lbs.
Cost per lb.	5	5	5	per lb.
Total budgeted direct materials cost	16510	17045	16880
Workings:
	Production Budget
	April	May	June
Next month's budgeted sales (units)	700	650	740
Ratio of inventory to future sales	40%	40%	40%
Budgeted ending inventory (units)	280	260	296
Add budgeted sales for the month	620	700	650
Required units of available production	900	960	946
Deduct beginning inventory (units)	-248	-280	-260
Production units	652	680	686