Question

Zira Co. reports the following production budget for the next four months. April May June July Production (units) 642 670 676 656 Each finished unit requires four pounds of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month’s production needs. Beginning raw materials inventory for April was 1,027 pounds. Assume direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Production (units):

April= 642

May= 670

June= 676

July= 656

Each finished unit requires four pounds of raw materials.

Desired ending inventory= 40% of next month’s production needs.

Beginning raw materials= 1,027 pounds.

Direct materials= $4 per pound.

We need to use the following formula to calculate the purchases:

Purchases= production + desired ending inventory - beginning inventory

April (In pounds):

Production= 642*4= 2,568

Ending inventory= (670*4)*0.4= 1,072

Beginning inventory= (1,027)

Total= 2,613

Total cost= 2,613*4= $10,452

May (In pounds):

Production= 670*4= 2,680

Ending inventory= (676*4)*0.4= 1,082

Beginning inventory= (1,072)

Total= 2,690

Total cost= 2,690*4= $10,760

June (In pounds):

Production= 676*4= 2,704

Ending inventory= (656*4)*0.4= 1,050

Beginning inventory= (1,082)

Total= 2,672

Total cost= 2,672*4= $10,688