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 quater. 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.


Prepare a direct materials budget for the second quarter.

Answer 1

Answer and Explanation:

The preparation of the direct material budget for the second quarter is presented below:

Rida Inc

Direct Materials Budget Second Quarter

Units to be produced 240,000 units

Materials requirement per unit 0.60 pounds

Materials needed for production (pounds) 144,000 pounds

Add: Budgeted ending inventory (pounds) 9,450 pounds

(52,500 units × 0.60 pounds × 30%)

Total materials requirements (pounds) 153,450 pounds

Less: Beginning inventory (pounds) 43,200 pounds

Materials to be purchased (pounds) 110,250 pounds

Multiply Material price per pound $175

Budgeted cost of direct materials $19,293,750

We added the ending inventory and deduct the beginning inventory to the production units so that the purchased units could come and then multiply it with the material price per pound so that the budgeted cost could come