Question

DeWitt Industries has adopted the following production budget for the first 4 months of 2017.

Month		Units		Month		Units
January		10,430		March		5,130
February		8,210		April		4,470

Each unit requires 3 pounds of raw materials costing $3 per pound. On December 31, 2016, the ending raw materials inventory was 9,400 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.

		Continue		Eliminate		Net Income Increase (Decrease)
Sales		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Variable costs
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total variable		enter a total of the two previous amounts		enter a total of the two previous amounts		enter a total of the two previous amounts
Contribution margin		enter a dollar amount		enter a dollar amount		enter a dollar amount
Fixed costs
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total fixed		enter a total of the two previous amounts		enter a total of the two previous amounts		enter a total of the two previous amounts
Net income (loss)		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

Veronica is select an optionincorrectcorrect correctincorrect

Answer 1

Raw Material Budget
	January	February	March	April	Total
Budgeted Production (Units)	10430	8210	5130	4470
Raw Material per unit (Pounds)	3	3	3	3
Material for Production	31290	24630	15390	13410
Add : Desired Ending Inventory	4926	3078	2682
Material Required	36216	27708	18072
Less : Beginning Inventory	9400	4926	3078
Material to be purchased (Pounds)	26816	22782	14994		64592
Cost per Pound	$              3.00	$              3.00	$              3.00
Purchase cost	$          80,448	$          68,346	$          44,982		$       193,776

Ending Inventory is 20% of next months production needs
January 20% of 24630, February 20% of 15390 and March 20% of 13410