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14 August, 01:23

Perine Company has 2,392 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,600 and 6,000 units, respectively. 2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $9. Management desires an ending inventory equal to 26% of next month's materials requirements.

Prepare the direct materials budget for January.

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  1. 14 August, 01:35
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    Instructions are below.

    Explanation:

    Giving the following information:

    Beginning inventory = 2,392 pounds

    Production:

    January = 4,600 units

    February = 6,000 units

    2 pounds of raw materials are needed for each unit

    The estimated cost per pound = $9.

    Management desires an ending inventory equal to 26% of next month's materials requirements.

    To calculate the purchases for January, we need to use the following formula:

    Purchases = sales + desired ending inventory - beginning inventory

    First, we will determine the pounds needed for January.

    Budgeted Direct material:

    Production = 4,600*2 = 9,200 pounds

    Ending inventory = (6,000*2) * 0.26 = 3,120 punds

    Beginning inventory = (2,392) pounds

    Total = 9,928 pounds

    Total direct material cost = 9,928*9 = $89,352
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