Question

Perine Company has 2,376 pounds of raw materials in its December 31, 2016, ending inventory. Required production for January and February of 2017 are 4,570 and 6,030 units, respectively. 2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $9. Management desires an ending inventory equal to 26% of next month’s materials requirements. Prepare the direct materials budget for January. (Round intermediate calculations and final answer to 0 decimal places, e.g. 5,275.)

Prepare the direct materials budget for January. (Round intermediate calculations and final answer to O decimal places, e.g. 5,275.) PERINE COMPANY Direct Materials Budget $

Answer 1

Direct materials budget

Units to be produced	4,570
Direct materials per unit (pound)	2
Total pounds needed for production	4,570 x 2 = 9,140
Desired ending direct materials pounds	3,136
Total materials required	12,276
Beginning direct materials pounds	- 2,376
Direct material purchases	9,900
Cost per pound	$9
Total cost of direct material purchases	$89,100

Total pounds needed for production in February = Units to be produced x Direct materials per unit

= 6,030 x 2

= 12,060 pounds

Desired ending direct materials for January = Total pounds needed for production in February x 26%

= 12,060 x 26%

= 3,136 pounds

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