Question

The following information is from the Manufacturing budget and the budgeted financial statements of Fabor Fabrication. Direct materials inventory, January 1 $ 68,000. Direct materials inventory, December 31 106,000. Direct materials budgeted for use during the year 390,000. Accounts payable to suppliers of materials, January 1 $50,000. Accounts payable to suppliers of materials, December 31 $79,000. Compute the budgeted amount for purchases of direct materials during the year. Compute the budgeted amount for cash payments during the year to suppliers of materials.

Answer 1

Requirement 1

Calculation of budgeted amount of material to be purchased
Material to be used	$    3,90,000.00
Add: Ending Material Inventory Budgeted	$    1,06,000.00
Total material needed	$    4,96,000.00
Less: Beginning Material inventory budgeted	$       68,000.00
Material budgeted to be purchased	$    4,28,000.00

Requirement 2

Calculation of budgeted amount of cash payment to supplier
Budgeted Material Purchase	$    4,28,000.00
Less: Decrease in Accounts payable during the year (79000-50000)	$       29,000.00
Budgeted amount of cash to be paid to supplier	$    3,99,000.00