Question

Production Budget
	Q1	Q2	Q3	Q4	Total
Sales in Units	1,000	1,200	1,500	2,000	5,700
Add: Desired Ending Inv.	240	300	400	400	400
Total Needs	1,240	1,500	1,900	2,400	6,100
Less:Beginning Inv.	180	240	300	400	180
Units to be produced	1,060	1,260	1,600	2,000	5,92

The Direct Materials Budget tells management how much must be bought to support production and the cost of those purchases.

Plain t-shirts cost $3.00 each, and ink (for the screen printing) cost $0.20 per ounce.  The factory needs one plain t-shirt and five ounces of ink for each logoed t-shirt that it produces.  Texas Rex’s policy is to have 10% of the following quarter’s needs in ending inventory. The factory has 58 plain t-shirts and 390 ounces of ink on hand on January 1.  At the end of the year, the desired ending inventory is 106 plain t-shirts and 530 ounces of ink.

Texas Rex, Inc.

Direct Materials Budget

For the year ending December 31, 2018

Plain t-shirts:                Q1                    Q2                    Q3                    Q4                    Total

Units to be Produced

Direct Materials per unit_______           _______           ________         _______           ________

Production Needs         

Desired Ending Inv.       _______           _______           ________         _______           ________

Total Needs

Less Beginning Inv.        _______           _______           ________         _______           ________

Direct Materials

To be Purchased

Cost per t-shirt              _______           _______           ________         _______           ________

Total T-shirt Purchase

Cost

Ink:                              Q1                    Q2                    Q3                    Q4                    Total

Units to be Produced

Direct Materials per unit_______           _______           ________         _______           ________

Production Needs         

Desired Ending Inv.       _______           _______           ________         _______           ________

Total Needs

Less Beginning Inv.        _______           _______           ________         _______           ________

Direct Materials

To be Purchased

Cost per ounce              _______           _______           ________         _______           ________

Total Ink Purchase Cost

Total Cost of

All Direct Materials

The Direct Labor Budget shows how many hours are required for production and the total cost of those hours.  It takes 0.12 hours to produce one t-shirt.  The average wage cost per hour is $10.

Answer 1

Direct Materials Budget
For the year ending December 31, 2018
Plain t-shirts	Q1	Q2	Q3	Q4	Total
Units to be produced	1060	1260	1600	2000	5920
x Direct materials per unit	1	1	1	1	1
= Production needs	1060	1260	1600	2000	5920
+ Desired ending inventory	126	160	200	106	106
= Total needs	1186	1420	1800	2106	6026
Less beginning inventory	58	126	160	200	58
= Direct materials to be purchased	1128	1294	1640	1906	5968
x Cost per t-shirt	$       3.00	$       3.00	$       3.00	$       3.00	$       3.00
= Total t-shirt purchase cost (a) $	3384	3882	4920	5718	17904
Ink:	Q1	Q2	Q3	Q4	Total
Units to be produced	1060	1260	1600	2000	5920
x Direct materials per unit	5	5	5	5	5
= Production needs	5300	6300	8000	10000	29600
+ Desired ending inventory	630	800	1000	530	530
= Total needs	5930	7100	9000	10530	30130
Less beginning inventory	390	630	800	1000	390
= Direct materials to be purchased	5540	6470	8200	9530	29740
x Cost per ounce	$       0.20	$       0.20	$       0.20	$       0.20	$       0.20
= Total ink purchase cost (b) $	1108	1294	1640	1906	5948
Total cost of all direct materials (a)+(b) $	4492	5176	6560	7624	23852

Ending inventory for Q1 = 10% x Production needs of Q2

Beginning inventory for Q2 = Ending inventory of Q1

Direct Labor Budget
For the year ending December 31, 2018
	Q1	Q2	Q3	Q4	Total
Units to be produced	1060	1260	1600	2000	5920
x Direct labor hours per unit	0.12	0.12	0.12	0.12	0.12
= Production needs	127.20	151.20	192.00	240.00	710.40
x Wage cost per hour	$          10	$          10	$          10	$          10	$          10
= Total direct labor cost $	1272	1512	1920	2400	7104