Question

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.

Answer 1

Direct material budget:

Sales= $49,200

Ending inventory= $13,440

Beginning inventory= $(9,840)

Total= $52,800

Step-by-step 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