Junker Corp budgets its monthly production of doohickeys for

Junker Corp. budgets its monthly production of doohickeys for       the first four months of the year as follows: January 32,500       units; February 38,500 units; March 39,750 units; April 38,750         units.

          Each doohickey requires 5 pounds of gunk. Gunk costs         $0.50/pound.  

          The company’s policy is ending inventory of raw materials each    month must be 20% of the following month’s production needs.

         

          Prepare a materials purchase budget for the Jan-Mar quarter in       pounds of gunk and $.

Solution

Jan Feb March Quarter April Poduction Units 32500 38500 39750 110750 38750 Raw material require per unit 5 5 5 5 5 Total raw material requirement 162500 192500 198750 553750 193750 Add: Desired Ending Inventory 38500 39750 38750 38750 Total raw material requirement 201000 232250 237500 592500 Less: Desired Beginning Inventory 32500 38500 39750 32500 Budgeted Raw material purchase units 168500 193750 197750 560000 Raw material cost per unit 0.5 0.5 0.5 0.5 Budgeted Raw matrial purchase in $ 84250 96875 98875 280000