Yem expects to produce 1 comma 750 units in January and 2 comma 120 units in February. The company budgets 5 pounds per unit of direct materials at a cost of $ 45 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 5 comma 300 pounds. Yem desires the ending balance in Raw Materials Inventory to be 40 % of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 000 pounds. Prepare Yem 's direct materials budget for January and February.

Instructions are below.

Explanation:

Giving the following information:

Production:

January = 1,750 units

February = 2,120 units

The company budgets 5 pounds per unit of direct materials at a cost of $ 45 per pound.

Beginning inventory = 5,300 pounds.

Desired ending inventory = 40 % of the next month's direct materials needed for production.

The desired ending balance for February is 4,000 pounds.

The purchases of direct material are calculated using the following formula:

Purchases = sales + desired ending inventory - beginning inventory

January (in pounds):

Production = 1,750*5 = 8,750

Desired ending inventory = (2,120*5) * 0.4 = 4,240

Beginning inventory = (5,300)

Total purchase = 7,690 pounds

Total cost = 7,690*45 = $346,050

February (in pounds):

Production = 2,120*5 = 10,600

Desired ending inventory = 4,000

Beginning inventory = (4,240)

Total purchase = 10,360 pounds

Total cost = 10,360*45 = $466,200