Question

Electro Company budgets production of 450,000 transmissions in the second quarter and 520,000 transmissions in the third quarter. Each transmission requires 0.80 pounds of a key raw material. The company aims to end each quarter with an ending inventory of direct materials equal to 20% of next quarter’s budgeted materials requirements. Beginning inventory of this raw material is 72,000 pounds. Direct materials cost $1.70 per pound. Prepare a direct materials budget for the second quarter.

Short answer

The total budgeted direct materials for the second quarter will be $631,040.

Step-by-step solution

Introduction

Raw materials are those items that is listed under the current assets of the organizations balance sheet that is required for ongoing production of goods.

Direct materials budget

Electro Company
Direct materials budget
For the second quarter
Particulars	Amount
Budgeted production	450,000
Multiply: Materials required	0.80
Materials needed	360,000
Add: Ending inventory	83,200
Total materials	443,200
Less: Beginning inventory	72,000
Materials purchased	371,200
Multiply: Materials price	$1.70
Total budgeted direct materials cost	$631,040