Question

Sheridan Company has 1,760 pounds of raw materials in its December 31, 2021, ending inventory. Required production for January and February of 2022 are 3.520 and 4,400 units, respectively. Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 25% of next month's materials requirements.

Prepare the direct materal budget for January.

Answer 1

The direct material budget for January is $55,440.

Step-by-step explanation:

To prepare the direct material budget for January, you need to calculate the raw materials required for production and the desired ending inventory. The required production for January is 3,520 units, and each unit requires 2 pounds of raw materials.

Therefore, the total raw materials required for January is 3,520 units * 2 pounds/unit = 7,040 pounds.

The management desires an ending inventory equal to 25% of next month's materials requirements.

Since the materials requirements for February are 4,400 units * 2 pounds/unit = 8,800 pounds, the desired ending inventory for January is 25% * 8,800 pounds = 2,200 pounds.

Adding the raw materials required for production to the desired ending inventory, the total raw materials needed for January is 7,040 pounds + 2,200 pounds = 9,240 pounds.

Since the estimated cost per pound is $6, the direct material budget for January would be $6/pound * 9,240 pounds = $55,440.