Question

Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It plans production of 240,000 units in the second quarter and 52,500 units in the third quarter. Raw material inventory is 43,200 pounds at the beginning of the second quarter. Other information is as follows:

Direct materials : Each unit requires 0.60 pounds of a key raw material, priced at $ 175 per pound. The company plans to end each quarter with an ending inventory of materials equal to 30% of next quarter's budgeted materials requirements.

Required:
Prepare a direct material budget for second quarter. Direct material: each unit requires 0.60 pound. The company plans to end each quarter with an ending inventory of materials equal to 30% of next quarter's budgeted materials requirement.

Answer 1

$19,293,750.

Step-by-step explanation:

Third quarter material requirement = production units× quantity per unit

= 52,500 × 0.6 pound

=31,500 pounds

Closing inventory for second quarter = 30% × material required for 3rd quarter

= 30% × 31,500 pounds =

= 9,450 pounds

Material required production for Second Quarter (usage budget)

= 240,000 × 0.6 pound = 144,000 pounds

Material purchase budget = material usage + closing inventory - opening inventory

= 144,000 + 9,450 - 43,200

= 110,250

Material budget ($)

= 110,250 × $175

= $19,293,750.