Question

Yem expects to produce 1,700 units in January and 2,180 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $25 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 5,700 pounds. Yem desires the ending balance in Raw Materials Inventory to be 20% of the next month's direct materials needed for production. Desired ending balance for February is 4,200 pounds. Prepare Yem's direct materials budget for January and February. Begin by preparing the direct materials budget for January and February through total direct materials needed line and then complete the budget by calculating the budgeted cost of direct materials purchases. Yem Company Direct Materials Budget Two Months Ended January 31 and February 28 January February Budgeted units to be produced Direct materials (pounds) per unit Direct materials needed for production Plus Desired direct materials in ending inventory (pounds) Total direct materials needed Less: Direct materials in beginning inventory (pounds) Budgeted purchases of direct materials Direct materials cost per pound Budgeted cost of direct materials purchases

Answer 1

Direct material budget

Two months ended January 31 and February 28

	January	February
Budgeted units to be produced	1700	2180
Direct material pounds per unit	3	3
Direct material needed for production	5100	6540
Add: Desired direct materials in ending inventory	1308	4200
Total Direct material needed	6408	10740
Less: Direct material in beginning inventory	-5700	-1308
Budgeted purchases of direct material	708	9432
Direct material cost per pound	25	25
Budgeted cost of direct material purchase	17700	235800