Croy Inc. has the following projected sales for the next five months: Month Sales in Units April 3,470 May 3,830 June 4,570 July 4,170 August 3,970 Croy's finished goods inventory policy is to have 50 percent of the next month's sales on hand at the end of each month. Direct materials costs $2.80 per pound, and each unit requires 2 pounds. Direct materials inventory policy is to have 50 percent of the next month's production needs on hand at the end of each month. Direct materials on hand at March 31 totaled 3,650 pounds. Required: 1. Determine budgeted production for April, May, and June. 2. Determine budgeted cost of materials purchased for April and May.

1. Production units for April 3,650 units

Production units for May 4,200 units

Production units for June 4,370 units

2. Budgeted cost of materials for April = $ 21,980

Budgeted cost of materials for April = $ 23,996

Explanation:

Computation of budgeted production units

April May June

Units Units Units

Ending Inventory - 50 % of next month 1,915 2,285 2,085

Add: Sales 3,470 3,830 4,570

Less: Opening Inventory-50% of current month (1,735) (1,915) (2,285)

Production units for the month 3,650 4,200 4,370

Computation of cost of materials

Units production 3,650 4,200 4,370

Material requirement per unit - 2 pounds

Total material requirement for production 7,300 8,400 8,740

Closing inventory-50% next month production 4,200 4,370

Opening inventory-50% of current production (3,650) (4,200)

Total material requirement for production 7,850 8,570

Cost per pound of direct material $ 2.80

Total direct material Budget $ 21,980 $ 23,996