Question

Rensing Ltd. estimates sales for the second quarter of 2017 will be as follows.

Month		Units
April		2,600
May		2,420
June		2,320

The target ending inventory of finished products is as follows.

March 31		2,010
April 30		2,270
May 31		2,100
June 30		2,360

2 units of material are required for each unit of finished product. Production for July is estimated at 2,670 units to start building inventory for the fall sales period. Rensing’s policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month’s production requirements.

Raw materials are expected to cost $6 per unit throughout the period.

Calculate the May raw materials purchases in dollars.

Raw material purchases cost ?

Answer 1

Solution

Raw material purchases cost = $28,980

Working

Production budget
	April	May	June
Units to be sold	2600	2420	2320
Desired Ending Finished Inventory	2270	2100	2360
Total Units needed	4870	4520	4680
Less : Beginning Finished Inventory	2010	2270	2100
Units to be Produced	2860	2250	2580

.

Direct Materials Budget
for the month of------
	April	May	June
Budgeted production (units)	2860	2250	2580
Materials requirements per unit	2	2	2
Materials needed for production (cc)	5720	4500	5160
Budgeted ending inventory (cc.)	2250	2580
Total materials requirements (cc.)	7970	7080
Beginning inventory (cc.)	2860	2250
Materials to be purchased (cc.)	5110	4830
Cost per lb.	$            6.00	$            6.00
Total budgeted direct materials cost	$      30,660.00	$      28,980.00