Question

Perine Company has 5,220 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,500 and 5,900 units, respectively. 4 pounds of raw materials are needed for each unit, and the estimated cost per pound is $7. Management desires an ending inventory equal to 29% of next month’s materials requirements. Prepare the direct materials budget for January.

Answer 1

$137,368

Step-by-step explanation:

Direct material are the raw material which is specifically used for the production of the unit. Direct material cost is directly attributable to the product.

As per given data

Beginning inventory= 5,220 pounds

Production:

January 2020 = 4,500 units

February 2020 = 5,900 units

Each unit require 4 pounds of raw materials

Material for production

January 2020 = 4,500 units x 4 Pound per unit = 18,000 pounds

February 2020 = 5,900 units x 4 Pound per unit = 23,600 pounds

Estimated cost is $7 per pound.

January 2020 = 18,000 pounds x $7 = $126,000

February 2020 = 23,600 pounds x $7 = $165,200

Ending inventory is 29% of next month’s materials requirements.

Ending Inventory

Direct material budget January:

Ending inventory= 23,600 x 29% = 6,844 pounds

Beginning inventory= 5,220 pounds

Purchases = Production + Ending Inventory - Beginning Inventory

Purchases = 18,000 + 6,844 - 5,220 = 19,624 pounds

Total cost= 19,624 x $7= $137,368

Answer 2

Instructions are below.

Step-by-step explanation:

Giving the following information:

Beginning inventory= 5,220 pounds

Production:

January= 4,500 units

February= 5,900 units

4 pounds of raw materials are needed for each unit

The estimated cost per pound is $7.

Management desires an ending inventory equal to 29% of next month’s materials requirements.

First, we need to calculate the number of pounds needed for each month:

January= 4,500*4= 18,000 pounds

February= 5,900*4= 23,600 pounds

Direct material budget January:

Production= 18,000

Desired ending inventory= (0.29*23,600)= 6,844

Beginning inventory= (5,220)

Total pounds= 19,624

Total cost= 19,624*7= $137,368