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4 December, 17:28

YadaYada expects to produce 1 comma 9501,950 units in JanuaryJanuary and 2 comma 1702,170 units in FebruaryFebruary. The company budgets 22 pounds per unit of direct materials at a cost of $ 50$50 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on JanuaryJanuary 1 is 5 comma 6005,600 pounds. YadaYada desires the ending balance in Raw Materials Inventory to be 8080 % of the next month's direct materials needed for production. Desired ending balance for FebruaryFebruary is 4 comma 1004,100 pounds. Prepare YadaYada 's direct materials budget for JanuaryJanuary and FebruaryFebruary.

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  1. 4 December, 17:52
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production:

    January = 1,950 units

    February = 2,170 units

    The company budgets 2 pounds per unit of direct materials for $50 per pound.

    Beginning inventory = 5,600 pounds.

    Yada desires the ending balance in Raw Materials Inventory to be 80% of the next month's direct materials needed for production. Desired ending balance for February is 4,100 pounds.

    We need to use the following formula structure:

    Direct material budget = production + desired ending inventory - beginning inventory

    Direct material budget January (in pounds):

    Production = 1,950*2 = 3,900

    Desired ending inventory = (2,170*2) * 0.8 = 3,472

    Beginning inventory = (5,600)

    Total = 1,772

    Total cost = 1,772*50 = $88,600

    Direct material budget February (in pounds):

    Production = 2,170*2 = 4,340

    Desired ending inventory = 4,100

    Beginning inventory = (3,472)

    Total = 4,968

    Total cost = 4,968*50 = $248,400
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