Question

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

   

	April		May		June		July
Sales (units)	690		770		720		810

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 276 units. Assume July's budgeted production is 720 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 1,083 pounds. Assume direct materials cost $5 per pound.

	RUIZ CO. Direct Materials Budget For April, May, and June April May June Budgeted production (units) 770 720 Materials requirements per unit 40 40 40 lbs. Materials needed for production (lbs.) Budgeted ending inventory (lbs.) 690 770 720 lbs. Total materials requirements (lbs.) 30 lbs. Beginning inventory (lbs.) Materials to be purchased (lbs.) Cost per lb. Total budgeted direct materials cost

Answer 1

RUIZ CO.
Production budget
	April	May	June	July
Units to be sold	690	770	720
Desired Ending Finished Inventory	308	288	324
Total Units needed	998	1058	1044
Less : Beginning Finished Inventory	276	308	288
Units to be Produced	722	750	756	720

RUIZ CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted production (units)	722	750	756
Materials requirements per unit	5	5	5
Materials needed for production (lbs.)	3610	3750	3780
Budgeted ending inventory (lbs.)	1125	1134	1080
Total materials requirements (lbs.)	4735	4884	4860
Beginning inventory (lbs.)	1083	1125	1134
Materials to be purchased (lbs.)	3652	3759	3726
Cost per lb.	$ 5.00	$ 5.00	$5.00
Total budgeted direct materials cost	$ 18,260.00	$ 18,795.00	$ 18,630.00

Ending inventory of June = July Raw material needs x30%

July raw material needs=720 units x 5=3600.