Question

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

	Units
	12" Pizza		16" Pizza
Budgeted production volume	13,000		23,600

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

		12" Pizza		16" Pizza
Direct materials:
	Dough	0.90	lb. per unit	1.50	lbs. per unit
	Tomato	0.60		1.00
	Cheese	0.80		1.30

In addition, Romano's has determined the following information about each material:

	Dough		Tomato		Cheese
Estimated inventory, September 1	590	lbs.	220	lbs.	370	lbs.
Desired inventory, September 30	620	lbs.	210	lbs.	400	lbs.
Price per pound	$1.00		$2.70		$3.20

Prepare September's direct materials purchases budget for Romano’s Frozen Pizza Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Romano’s Frozen Pizza Inc.
Direct Materials Purchases Budget
For the Month Ending September 30
	Dough	Tomato	Cheese	Total
Units required for production:
12" pizza
16" pizza
Desired inventory, September 30
Total units available
Estimated inventory, September 1
Total units to be purchased
Unit Price	x $	x $	x $
Total direct materials to be purchased	$	$	$	$

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Answer 1

Romano’s Frozen Pizza Inc.
Direct Materials Purchases Budget
For the Month Ending September 30
	Dough	Tomato	Cheese	Total
Units required for production:
12" pizza	11700	7800	10400
16" pizza	35400	23600	30680
Desired inventory, September 30	620	210	400
Total units available	47720	31610	41480
Estimated inventory, September 1	-590	-220	-370
Total units to be purchased	47130	31390	41110
Unit Price	$        1.00	$        2.70	$          3.20
Total direct materials to be purchased	$47,130.00	$84,753.00	$131,552.00	$263,435.00

Units required have been calculated by multiplying the number of units by the quantity required for each pizza. For example for a 12” pizza dough required is 0.9 lbs per unit, hence for making 13000 pizzas units required for dough is ‘13000 * 0.9’ which is equal to 11700 as mentioned in the table above. Similarly all units required for production are calculated.

Desired inventory on 30^th September is provided in the question.

Total units available is the sum of Units required for production and desired inventory on 30^th September.

Estimated inventory on September 1 is provided in question.

Total units to be purchased have been calculated as = Total Units Available - Estimated inventory on September 1

Unit prices are provided in question.

Total direct material cost are calculated by multiplying ‘Total units to be purchased’ by ‘Unit Prices’.