Question

Budgeting Direct Material

The Jung corporation's budget calls for the following production

Quarter1	45,000	units
Quarter 2	38,000	units
Quarter3	34,000	units
Quarter4	48,000	units

Each unit of production requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30 percent of that quarter's direct material requirements.

required

Compute budgeted direct materials purchases for the third quarter

Answer 1

Answer      [Refer workingn note 1]

114,600

pounds

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Working note 1 - Direct materials purchases for quarter 3
	Quarter 3
Budgeted production (units)                                                                                                      (a)	34,000	units
Direct materials requirement per unit                                                                                        (b)	3	pounds
Direct materials requirement for production                                                                              (c = a x b)	102,000	pounds
Add: Desired ending direct materials inventory              [Refer working note 2]                       (d)	43,200	pounds
Total                                                                                                                                          (e = c + d)	145,200	pounds
Less: Beginning direct materials inventory          [Refer working note 3] (f)	30,600	pounds
Direct materials purchases                                                                                                         (e - f)	114,600	pounds

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Working Note 2 - Desired ending direct materials inventory for Quarter 3
Desired ending direct materials inventory for Quarter 3 = Beginning direct materials inventory for Quarter 4 = Direct material requirements in Quarter 4 x 30%
Budgeted production for Quarter 4                                                  (a)	48,000	units
Direct materials requirement per unit                                              (b)	3	pounds
Direct materials requirement for production in Quarter 4              (a x b)	144,000	pounds
Beginning direct materials inventory for Quarter 4                         (144,000 pounds x 30%]	43,200	pounds
Desired ending direct materials inventory for Quarter 3	43,200	pounds

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Working note 3 - Beginning direct materials inventory for Quarter 3
Beginning direct materials inventory for Quarter 3 = Direct material requirements in Quarter 3 x 30%
Budgeted production for Quarter 3                                                 (a)	34,000	units
Direct materials requirement per unit                                              (b)	3	pounds
Direct materials requirement for production in Quarter 3              (a x b)	102,000	pounds
Beginning direct materials inventory for Quarter 3                         (102,000 pounds x 30%]	30,600	pounds

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