Question

Direct Materials Purchases Budget

A). Lorenzo’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	16,000		25,500

Three direct materials are 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	0.80	lb. per unit	1.50	lbs. per unit
	Tomato	0.50		0.70
	Cheese	0.70		1.30

In addition, Lorenzo’s has determined the following information about each material:

	Dough		Tomato		Cheese
Estimated inventory, September 1	530	lbs.	240	lbs.	270	lbs.
Desired inventory, September 30	560	lbs.	230	lbs.	300	lbs.
Price per pound	$1.00		$2.80		$3.30

Prepare September's direct materials purchases budget for Lorenzo’s Frozen Pizza Inc. When required, enter unit prices to the nearest cent.

Lorenzo’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
Plus desired inventory, September 30
Total pounds required
Less estimated inventory, September 1
Total units to be purchased
Unit price	x $	x $	x $
Total direct materials to be purchased	$	$	$	$

B). Lorenzo’s Frozen Pizza Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows:

March	$144,900
April	136,200
May	123,900

Depreciation, insurance, and property taxes represent $31,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. 65% of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.

Prepare a schedule indicating cash payments for selling and administrative expenses for March, April, and May.

Lorenzo’s Frozen Pizza Inc.
Schedule of Cash Payments for Selling and Administrative Expenses
For the Three Months Ending May 31
	March	April	May
March expenses:
Paid in March	$
Paid in April		$
April expenses:
Paid in April
Paid in May			$
May expenses:
Paid in May
Total cash payments	$	$	$

Answer 1

A.	Lorenzo’s Frozen Pizza Inc.
	Direct Materials Purchases Budget
	For the Month Ending September 30
		Dough	Tomato	Cheese	Total
	Units required for production:(WN-1)
	a.12" pizza	12800	8000	11200	32000
	b.16" pizza	38250	17850	33150	89250
	c.Plus desired inventory, September 30	530	240	270	1040
	d.Total pounds required(a+b+c)	51580	26090	44620	122290
	e.Less estimated inventory, September 1	560	230	300	1090
	f.Total units to be purchased(d-e)	51020	25860	44320	121200
	Unit price	$1.00	$2.80	$3.30	7.1
	Total direct materials to be purchased	$51,020.00	$72,408.00	$146,256.00	269684
	WN-1
	Calculation of Units required for production
	Budgeted Production Volume	12'' Pizza = 16000			16'' Pizza = 25500
	Particulars	Dough	Tomato	Cheese	Dough	Tomato	Cheese
	a. Direct Materials required per unit	0.8	0.5	0.7	1.5	0.7	1.3
	b. No.of Units to be produced	16000	16000	16000	25500	25500	25500
	c. Direct Materials Required(a*b)	12800	8000	11200	38250	17850	33150
B.	Particulars	March	April	May
	a.Selling and Administrative Expenses	144900	136200	123900
	b.Less - Depn,Insurance and Property Taxes	31000	31000	31000
	c.Remainder of Expenses	113900	105200	92900
	d.65% paid in Month Incurred(c*65%)	74035	68380	60385
	e.35% paid in following month(c*35%)	39865	36820	32515
	Lorenzo’s Frozen Pizza Inc.
	Schedule of Cash Payments for Selling and Administrative Expenses
	For the Three Months Ending May 31
		March	April	May
	March expenses:
	Paid in March	74035
	Paid in April		39865
	April expenses:
	Paid in April		68380
	Paid in May			36820
	May expenses:
	Paid in May			60385
	Total cash payments	74035	108245	97205
	Out of 31000 incurred insurance premium paid in Feb 28 hence it will not come in above schedule and depreciation is an non cash expense and property taxes paid in june hence this also will not come in above schedule