Question

Refer to the information in Exercise 20-3. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs., Beginning raw materials inventory for April was 663 pounds. Assume direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June.

Short answer

The cost of budgeted direct material for the month of April, May and June will be $9,868, $11,340 and $11,080.

Step-by-step solution

Preparation of direct materials budget

Ruiz Co
Direct materials budget
For the month of April, May and June
Particulars	April	May	June
Budgeted production	455	570	560
Multiply: Materials requirement	5	5	5
Materials needed for production	2,275	2,850	2,800
Add: Budgeted ending inventory	855	840	810
Total material requirements	3,130	3,690	3,610
Less: Beginning inventory	663	855	840
Materials purchased	2,467	2,835	2,770
Multiply: Cost	$4	$4	$4
Total budgeted direct material	$9,868	$11,340	$11,080

Notes to accounts

Calculation of budgeted ending inventory

Particulars	April	May	June	July
Budgeted production	455	570	560	540
Multiply: Materials requirement	5	5	5	5
Materials needed for production	2,275	2,850	2,800	2,700
Ending inventory is 30% of the next month’s sales (Given)
April $(\mathbf{2}\mathbf{,}\mathbf{850}\mathbf{\times }\mathbf{30}\mathbf{\%})$	855
May $(\mathbf{2}\mathbf{,}\mathbf{800}\mathbf{\times }\mathbf{30}\mathbf{\%})$		840
June $(\mathbf{2}\mathbf{,}\mathbf{700}\mathbf{\times }\mathbf{30}\mathbf{\%})$			810