Question

Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month’s ending inventory of raw materials should be 40% of the following month’s budgeted production. The January 1 raw materials inventory has 130 pounds of Z.

Prepare a direct materials budget for January

Short answer

The direct materials budget for the month of January will be $4,540

Step-by-step solution

Given the information as

Particulars	Amount
Total budget production in January	400 units
Total budget production in February	200 units
Cost	$2 per pound
Raw materials	40%
Raw materials required	5 pounds
Total raw materials inventory	130 pounds

Preparation od direct materials budget for January

Zortek Corp
Direct material budget
For the month of January
Particulars	Amount
Budgeted production	400
Multiply: Raw material per unit	5
Material needed for production	2000
Add: Desired ending inventory	400
Total material requirement	2,400
Less: Beginning inventory	130
Material to be purchased	2,270
Cost per pound	$2
Total cost of direct material purchase	$4,540