Question

Becker Bikes manufactures tricycles. The company expects to sell 350 units in May and 480 units in June. Beginning and ending finished goods for May is expected to be 95 and 60 units, respectively. June’s ending finished goods is expected to be 70 units. Each unit requires 3 wheels at a cost of $5 per wheel. Becker requires 20 percent of next month’s material production needs on hand each month. July’s production units is expected to be 450 units.

Compute Becker’s direct materials purchases budget with respect to wheels for May and June.

Answer 1

July estimated production = 450 units

Raw materials per unit = $3

Total raw materials needed for production in July = July estimated production x Raw materials per unit

= 450 x 3

= 1,350

Ending raw materials inventory of April = Raw materials needed for production in May x 20%

= 945 x 20%

= 189

Direct Material Budget
	May	June
Sales	350	480
Ending inventory of finished goods	60	70
Total units needed	410	550
Beginning inventory of finished goods	-95	-60
Production units	315	490
Raw materials per unit	3	3
Total raw materials needed for production	945	1470
Ending raw materials inventory	1,470 x 20% = 294	1,350 x 20% = 270
Total raw materials inventory needed	1,239	1,740
Beginning raw materials inventory	-189	-294
Total raw materials needed for production	1,050	1,446
Raw materials purchase cost per unit	$5	$5
Total cost of raw materials purchased	$                  5,250	$                  7,230