Question

Zira Co. reports the following production budget for the next four months. Production (units) April 632 May 662 June 666 July 646 Each finished unit requires four pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month's production needs. Beginning raw materials inventory for April was 758 pounds. Assume direct materials cost $4 per pound Prepare a direct materials budget for April, May, and June (Round your intermediate calculations and final answers to the nearest whole dollar amount.) ZIRA CO. Direct Materials Budget For April, May, and June April May June Materials needed for production (lbs) Total materials requirements (lbs) Materials to be purchased (lbs) Total budgeted direct materials cost

Answer 1

Solution:

ZIRA CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted Production (Units) [a]	632	660	666	units
Materials Requirements per unit [b]	4	4	4	lbs
Materials needed for production (lbs) [c] = [a x b]	2528	2640	2664	lbs
Budgeted ending Inventory (lbs) [d]	792	799	775	lbs
Total Material Requirement [e] = [c] + [d]	3320	3439	3439	lbs
Beginning Inventory(lbs) [f]	758	792	799	lbs
Materials to be Purchased(lbs) [g] = [e] - [f]	2562	2647	2640	lbs
Cost per lb [h]	4	4	4	per lb
Total budgeted direct material cost [i] = [g] x [h]	10248	10589	10560

Explanation:

In the direct materials budget , we calculate the total direct materials (lbs) which will be purchased in a particular period.

This is calculated by = Materials needed for production + Ending Inventory to be kept for next period - Inventory already held at the beginning of the period .

Materials needed for the production = Budgeted production x Material requirement per unit

Ending Inventory to be kept = Materials needed for next period x 30%

For April = (660 units x 4) x 30% = 792 lbs

For May = (666 units x 4) x 30% = 799 lbs

For June = (646 units x 4 ) x 30% = 775 lbs

Beginning Inventory :

For April = 758 lbs (given)

For May = 792 lbs ( Ending inventory of April)

For June = 799 lbs ( Ending Inventory of May)