Question

Direct Materials Purchases Budget Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 21 ounces of plastic costing $0.08 per ounce Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows: Units July 3,500 August 4,400 September 4,900 October 6,300 Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 30% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy Required: Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total. If required, round the total purchase cost to nearest whole value Langer Company Direct Materials Purchases Budget For July August and September August Units to be produced Direct materials per unit (ources) 21

Answer 1

The purchase budget is shown below along-with the formula view to help you understand formulas used

September 4,900 July Total August 4,400 Units to be produced Direct materials per unit Production Needs Desired ending inventory Total Needs Less:- Beginning Inventory Direct materials to be purchased 3,500 12,800 21 21 21 21 73,500 27,720 101,220 92,400 102,900 268,800 39,690 308,490 30,870 277,620 30,870 39,690 123,270 27,720 95,550 0.08 $ $ 6,333.60 $ 7,644.00 $ 8,937.60 142,590 30,870 111,720 0.08 $ 22,050 79,170 0.08 $ Cost per ounce $ 0.08 Total Purchase Cost $22,209.60

B C D E F 1 2 July September Total 3 August Units to be produced Direct materials per unit -SUM(D4:F4) 4400 4900 3500 21 =F5 5 21 21 -D5*D4 =F5* F4 G5*G4 Production Needs E5*E4 6 Desired ending inventory Total Needs Less:-Beginning Inventory Direct materials to be purchased - E6*30% F6*30% 6300*21*30% =F7 7 -E6+ E7 D6+ D7 =F6+F7 -G6+G7 -D6*30 % =F9 E7 -D7 G8-G9 =D8-D9 -E8- E9 =F8-F9 10 0.08 0.08 0.08 0.08 11 Cost per ounce Total Purchase Cost -E10*E11 -G10*G11 =F10*F11 D10*D11 12 13 14 15 16 17

Question-2 - Cash Payment Budget

(1) Direct Labor Payments From July = 35800 * 10% = 3,580

Overhead Payments = 79200 - 6350 = 72850

Total cash Payment = 199,940