Question

Exercise 21-5 DeWitt Industries has adopted the following production budget for the first 4 months of 2017. Month Units January February Units Month 10,100 March 8,100 April 5,100 4,100 Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2016, the ending raw materials inventory was 9,100 pounds. Management wants to have a raw materials inventory at the end of the month equal to 20% of next month's production requirements. Prepare a direct materials purchases budget by month for the first quarter.

Answer 1

Solution

DEWITT INDUSTRIES
Direct materials Purchases Budget
For the Quarter ended March
	January	February	March
Required production of Units of finished goods	10100	8100	5100
Units of Raw material needed per unit of finished goods	3	3	3
Units of raw material needed to meet production	30300	24300	15300
Budgeted Ending Inventory (Pound)	4860	3060	2460*
Total Units of raw material needed	35160	27360	17760
Beginning Inventory (Pound)	9100	4860	3060
Units of raw material to be purchased	26060	22500	14700
Unit cost of raw material	$                2.00	$               2.00	$                   2.00
Cost of raw material to be purchased	$     52,120.00	$    45,000.00	$         29,400.00

*4100 x 3 x 20%