Direct Materials Purchases Budget Anticipated sales for Safe

Direct Materials Purchases Budget

Anticipated sales for Safety Grip Company were 51,000 passenger car tires and 15,000 truck tires. Rubber and steel belts are used in producing passenger car and truck tires according to the following table:

The purchase prices of rubber and steel are $3.3 and $4.3 per pound, respectively. The desired ending inventories of rubber and steel belts are 48,000 and 10,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 56,000 and 8,000 pounds, respectively.

Prepare a direct materials purchases budget for Safety Grip Company for the year ended December 31, 20Y9.

	Passenger Car	Truck
Rubber	27 lbs. per unit	63 lbs. per unit
Steel belts	3 lbs. per unit	8 lbs. per unit

Solution

Safety Grip Company Direct Materials Purchases Budget For the Year Ending December 31, 20Y9 Rubber Steel Belts Total Pounds required for production: Passenger tires 1377000 153000 Truck tires 945000 120000 Desired inventory, December 31, 20Y9 48000 10000 Total 2370000 283000 Estimated inventory, January 1, 20Y9 56000 8000 Total units purchased 2314000 275000 Unit price 3.3 4.3 Total direct materials to be purchased 7636200 1182500 8818700