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Zortek Corp. budgets production of 400 units in January and 200 units in February


QS 22-7 Manufacturing: Direct materials budget P1 


Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month's ending inventory of raw materials should be 40% of the following month's budgeted production. The January 1 raw materials inventory has 130 pounds of Z. Prepare a direct materials budget for January.

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Answer #1

The direct material budget for January is as follows:


Zortek Corp.

Direct Materials Budget

January

Particulars$
Budgeted production units400
Add: Desired Ending Inventory (WN 1)80
Total Material Units Required480
Less: Beginning Inventory(130)
Total units to be produced350
Materials Required per unit  5 pounds
Material units to be Purchased in January350 units * 5 pounds = 1,750 pounds


Cost per unit of material$2 per pound
Total Cost of Direct Materials1,750 pounds * $2 = 3500 pounds

WN 1: Ending Inventory:

It should be 40% of the production of next month,

i.e., 40% of 200

= 80 units


answered by: gavin
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