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21 November, 14:56

Bell expects to produce 1 comma 800 units in January and 2 comma 155 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $ 10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 4 comma 950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20 % of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 860 pounds. Prepare Bell 's direct materials budget for January and February.

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  1. 21 November, 17:19
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production:

    January = 1,800 units

    February = 2,155 units

    The company budgets 3 pounds per unit of direct materials at a cost of $ 10 per pound.

    Beginning inventory = 4,950 pounds.

    Desired ending inventory = 20 % of the next month's direct materials needed for production.

    Desired ending balance for February is 4,860 pounds.

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

    Purchases = production + desired ending inventory - beginning inventory

    January (in pounds):

    Production = 1,800*3 = 5,400

    Desired ending inventory = (2,155*3) * 0.2 = 1,293

    Beginning inventory = (4,950)

    Total = 1,743

    Total cost = 1,743*10 = $17,430

    February (in pounds):

    Production = 2,155*3 = 6,465

    Desired ending inventory = 4,860

    Beginning inventory = (1,293)

    Total = 10,032

    Total cost = 10,032*10 = $100,320
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