Question

Becker Bikes manufactures tricycles. The company expects to sell 510 units in May and 640 units in June. Beginning and ending finished goods for May is expected to be 175 and 140 units, respectively. June’s ending finished goods is expected to be 150 units. Each unit requires 3 wheels at a cost of $21 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 610 units. Compute Becker’s direct materials purchases budget with respect to wheels for May and June. What is the budgeted cost of wheels purchased for May and June

Answer 1

Material Purchase Budget
	May	June
Production (Note	475	650
Wheel required per unit	3	3
Total Wheels required	1425	1950
Add: Closing (1950*20% , 1830 *20%)	390	*366
Less: Opening	-285	-390
Wheels required to be purchased	1530	1926

Working Note :

Production	May	June
Sales	510	640
Add: Closing	140	150
Less: Opening	-175	-140
Production	475	650

* June Closing Stock = Production units of July x Wheels required per unit x 20% = 610 * 3 * 20% = 366 wheels

Budgeted purchase cost
	May	June
Wheels required to be purchased	1530	1926
Cost per Wheel	$            21.00	$            21.00
Purchase cost of direct material - closure	$    32,130.00	$    40,446.00

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