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10 October, 01:04

Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It plans production of 248,000 units in the second quarter and 60,500 units in the third quarter. Raw material inventory is 74,400 pounds at the beginning of the second quarter. Other information follows:

Direct materials Each unit requires 0.60 pounds of raw material, priced at $183 per pound. The company plans to end each quarter with an ending inventory of materials equal to 50% of next quarter's budgeted materials requirements.

Required:

a. Prepare a direct materials budget for the second quarter.

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  1. 10 October, 03:17
    0
    Purchases (in pounds) = 92,550

    Total cost = $16,936,650

    Explanation:

    Giving the following information:

    Budgeted production:

    2nd quarter = 248,000 units

    3rd quarter = 60,500 units

    Beginning inventory = 74,400 pounds

    Each unit requires 0.60 pounds of raw material

    Buying price = $183 per pound.

    Desired ending inventory = 50% of next quarter's budgeted materials.

    To calculate the budgeted purchase of raw materials, we need to use the following formula:

    Purchases = sales + desired ending inventory - beginning inventory

    Purchases (in pounds) = (248,000*0.6) + (60,500*0.6) * 0.5 - 74,400

    Purchases (in pounds) = 148,800 + 18,150 - 74,400

    Purchases (in pounds) = 92,550

    Total cost = 92,550*183 = $16,936,650
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