Question

In: Accounting

Budgeting Direct Material The Jung corporation's budget calls for the following production Quarter1 45,000 units Quarter...

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

Solutions

Expert Solution

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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