Ramos Co. provides the following sales forecast and production budget for the next four months:

April May June July

Sales (units) 500 580 530 600

Budgeted production (units) 442 570 544 540

The company plans for finished goods inventory of 160 units at the end of June. In addition, each finished unit requires 5 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 30% of next month's production needs. Beginning direct materials inventory for April was 720 pounds. Direct materials cost $2 per pound. Each finished unit requires 0.50 hours of direct labor at the rate of $20 per hour. The company budgets variable overhead at the rate of $24 per direct labor hour and budgets fixed overhead of $8,400 per month.

Prepare a direct materials budget for April, May, and June.

Question

Nadeen

Business

5 September, 22:33

Ramos Co. provides the following sales forecast and production budget for the next four months:

April May June July

Sales (units) 500 580 530 600

Budgeted production (units) 442 570 544 540

The company plans for finished goods inventory of 160 units at the end of June. In addition, each finished unit requires 5 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 30% of next month's production needs. Beginning direct materials inventory for April was 720 pounds. Direct materials cost $2 per pound. Each finished unit requires 0.50 hours of direct labor at the rate of $20 per hour. The company budgets variable overhead at the rate of $24 per direct labor hour and budgets fixed overhead of $8,400 per month.

Prepare a direct materials budget for April, May, and June.

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Answers (1)

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Valentin · Answer 1

Instructions are below.

Explanation:

Giving the following information:

Budgeted production (units):

April = 442

May = 570

June = 544

July = 540

The company plans for a finished goods inventory of 160 units at the end of June.

Each finished unit requires 5 pounds of direct materials.

The company wants to end each month with direct materials inventory equal to 30% of next month's production needs.

Beginning direct materials inventory for April was 720 pounds.

Direct materials cost $2 per pound.

To calculate the direct material required for each month, we need to use the following formula:

Direct material budget (in pounds) = production + ending inventory - beginning inventory

Budgeted direct material in pounds and dollars:

April:

Direct material for production = 442*5 = 2,210 pounds

Ending inventory = (570*5) * 0.3 = 855

Beginning inventory = (720)

Total pounds = 2,345

Total cost = 2,345*2 = $4,690

May:

Direct material for production = 570*5 = 2,850 pounds

Ending inventory = (544*5) * 0.3 = 816

Beginning inventory = (855)

Total pounds = 2,811

Total cost = 2,811*2 = $5,622

June:

Direct material for production = 544*5 = 2,720 pounds

Ending inventory = (540*5) * 0.3 = 810

Beginning inventory = (816)

Total pounds = 2,714

Total cost = 2,714*2 = $5,428

July:

Direct material for production = 540*5 = 2,700 pounds

Beginning inventory = (810)

Total pounds = 1,890

Total cost = 1,890*2 = $3,780