Question

Zira Co. reports the following production budget for the next four months.

	April		May		June		July
Production (units)	654		695		687		667

Each finished unit requires five pounds 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 981 pounds. Assume direct materials cost $3 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 Material Budget
		March	April	May	June	July	Total for April-June
Budgeted Production units	a		654	695	687	667	2,036
Direct material consumption(pounds)	b=a*5	-	3,270	3,475	3,435	3,335	10,180
Closing stock= 30%*Next month's production	C=b*30%	981	1,043	1,031	1,001	-
Opening stock	d	-	981	1,043	1,031	-
Budgeted Purchase unit(pounds)	e=b+c-d	-	3,332	3,463	3,405	-	10,200
Budgeted Cost of Direct material purchase	f=e*$3		$ 9,994.50	$ 10,389.00	$ 10,215.00	$     -	30,599

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