5 DeWitt Industries has adopted the following production bud

5 DeWitt Industries has adopted the following production budget for the first 4 months Prepare a direct materials purchases budget (LO 2), AP E9- of 2017. Month Units January 10,000 February 8,000 Month Units March 5,000 April 4,000 Each unit requires 2 pounds of raw materials costing $3 per pound. On December 31 2016, the ending raw materials inventory was 4,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 20% of next month\'s production requirements Instructions Prepare a direct materials purchases budget by month for the first quarter

Solution

Direct Material Budget January February March Production 10000 8000 5000 Direct Material Required Per Unit 2 2 2 Material Required for Production 20000 16000 10000 Add Desired Ending Inventory (20% of next month production requirement) 3200 2000 1600 Total Need 23200 18000 11600 Less Ending Inventory 4000 3200 2000 Units to be Purchased 19200 14800 9600 Price Per Unit 3 3 3 Purchase in $ 57600 44400 28800