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29 September, 02:32

Perine Company has 1,640 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,100 and 5,600 units, respectively. 2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 20% of next month's materials requirements. Prepare the direct materials budget for January.

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  1. 29 September, 03:52
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    Direct material budget:

    Sales = $49,200

    Ending inventory = $13,440

    Beginning inventory = $ (9,840)

    Total = $52,800

    Explanation:

    Giving the following information:

    Beginning inventory = 1,640 pounds of raw materials.

    Required production:

    January = 4,100 units

    February = 5,600 units

    2 pounds of raw materials are needed for each unit

    The estimated cost per pound is $6.

    Management desires an ending inventory equal to 20% of next month's materials requirements.

    Direct material budget:

    Sales = (4,100*2) * $6 = $49,200

    Ending inventory = [ (5,600*2) * 0.20]*$6 = $13,440

    Beginning inventory = (1,640*6) = (9,840)

    Total = $52,800
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