Question

Zira Co. reports the following production budget for the next four months. April May June July Production (units) 455 570 560 540 Each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 663 pounds. Assume direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

The production budget for the next four months.

April= 455 units

May= 570 units

June= 560

July= 540 units

Each finished unit requires five pounds of raw materials.

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

Beginning raw materials inventory for April was 663 pounds. Assume direct materials cost $4 per pound.

Materials required= Production for the month + ending inventory - beginning inventory

April (In pounds):

Production for the month= 455*5= 2,275

Ending inventory= 570*0.30= 171*5= 855

Beginning inventory= (63)

Total pounds= 3,067

Total cost= 3,067*4= $12,268

May (in pounds):

Production for the month= 570*5= 2,850

Ending inventory= 560*0.30= 168*5= 840

Beginning inventory= (855)

Total pounds= 2,835

Total cost= 2,835*4= $11,340

June (in pounds):

Production for the month= 560*5= 2,800

Ending inventory= 540*0.30= 162*5= 810

Beginning inventory= (840)

Total pounds= 2,770

Total cost= $11,080