Question

On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.

Sales units: First quarter 5,800; second quarter 6,700; third quarter 7,200.
Ending raw materials inventory: 40% of the next quarter’s production requirements.
Ending finished goods inventory: 25% of the next quarter’s expected sales units.
Third-quarter production: 7,800 units.

The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.

Required:
Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017.

Answer 1

Direct Material Purchases pounds for the two quarters 24300 lbs and 28860lbs

Direct Materials ($) for the two quarters $ 121500 $ 144300

Step-by-step explanation:

First we calculate the production budget to find out the direct Material usage during the quarter. The ending inventories are calculated by taking 25% of the next quarter's sales. Also the ending inventory of one quarter is the beg. inventory of the next quarter.

Production = Sales + Ending Inventory - Opening Inventory

Hardin Company

Production Units Budget

For the quarters of the 6-month period ended June 30, 2017

Quarters

1 2 3 4

Sales Units 5800 6700 7200

+ Desired Ending Inventory 1675 1800

Less Opening Inventory 1450 1675 1800

Production Units 5575 6825 7800 (given)

Now we find the production units in pounds by multiplying the production units with pound per unit. Then we find the direct materials purchases in pounds and in dollars.

Direct Materials = Production + Ending Inventory - Opening Inventory

The ending inventories are calculated by taking 40% of the next quarter's production requirements. Also the ending inventory of one quarter is the beg. inventory of the next quarter.

Hardin Company

Direct Materials Budget

For the quarters of the 6-month period ended June 30, 2017

Quarters

1 2 3 Production Units 5575 6825 7800

D. Materials per unit 4 4 4

D. Materials (pounds) 22300 27300 31200

Add Desired Ending Inventory 10920 12480

Less Opening Inventory 8920 10920

Direct Material Purchases pounds 24300 28860

Direct Materials ($) 5 5

Direct Materials ($) $ 121500 $ 144300