Perine Company has 2,392 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,600 and 6,000 units, respectively. 2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $9. Management desires an ending inventory equal to 26% of next month's materials requirements.

Prepare the direct materials budget for January.

Instructions are below.

Explanation:

Giving the following information:

Beginning inventory = 2,392 pounds

Production:

January = 4,600 units

February = 6,000 units

2 pounds of raw materials are needed for each unit

The estimated cost per pound = $9.

Management desires an ending inventory equal to 26% of next month's materials requirements.

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

Purchases = sales + desired ending inventory - beginning inventory

First, we will determine the pounds needed for January.

Budgeted Direct material:

Production = 4,600*2 = 9,200 pounds

Ending inventory = (6,000*2) * 0.26 = 3,120 punds

Beginning inventory = (2,392) pounds

Total = 9,928 pounds

Total direct material cost = 9,928*9 = $89,352