Question

4. The DM budget: The Jam J Corporation's production budget calls for the following number of units to be produced each quarter for next year:

Budgeted production

Quarter 1	56,500	units
Quarter 2	54,800	units
Quarter 3	50,600	units
Quarter 4	51,900	units

Each unit of product requires three (3) pounds of direct material. The company's policy is to have ending raw materials inventory equal to 10% of the following quarter's direct material production needs.

Calculate the budgeted direct materials purchases for the second quarter.

Answer 1

Ans.	JAM J CORPORATION
	Direct Materials Budget
		Quarter 2
	Raw materials needed to meet production	164400
	Add: Desired ending raw materials inventory	15180
	Total units of raw materials needed	179580
	Less: beginning raw materials inventory	-16440
	Units of raw materials to be purchased	163140
	*Calculations for raw materials needed to meet production:
		Quarter 1	Quarter 2	Quarter 3
	Budgeted production (units)	56,500	54,800	50,600
	(X) Materials requirement per unit	3	3	3
	Raw materials needed to meet production	169500	164400	151800
	*Calculations for Ending inventory:
	Ending inventory for Quarter 2 = Raw materials need for Quarter 3 * 10%
	151,800 * 10%
	15180
	*Calculations for Beginning inventory:
	Quarter 2 beginning inventory = Ending inventory of quarter 1 =   Raw materials need for Quarter 2 * 10%
	164,400 * 10%
	16440

Answer 2

Budgeted Direct Materials Purchases

Particulars	Quarter -2
Production units	54800
Direct material per unit	3
Direct materials required for production	164400
Add : Closing Inventory	15180
Direct Materials Needed	179580
Less : Opening Inventory	(16440)
Direct Materials Purchased	163140