Question

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Check my work Delray Manufacturing needs to better budget and analyze costs. While Delray has experienced high sales growth, it has struggled to effectively manage costs and inventories. Delray aims to end each month with direct materials inventory equal to 40% of next month's production needs. Each finished unit requires 4 pounds of direct materials and 2 hours of direct labor. Delray budgets $12,000 of fixed overhead costs per month. A Tableau Dashboard is provided to aid our analysis. 0.66 points Sales Forecast & Production Budget (in Units) eBook 1,500 Print References Budgeted Production Sales Forecast 1,200 Budgeted Production 900 Sales Forecast 600 300 April Mav Screenshot Iulv

Answer 1

1.

Direct Material budget
	April	May	June
Budgeted Production (Units)	880	1100	1075
Material required per unit (Pounds)	4	4	4
Materials needed for production	3520	4400	4300
Add : Desired Ending Inventory	1760	1720	1800
Total Material Requirements (Pounds)	5280	6120	6100
Less : Beginning Inventory	1408	1760	1720
Materials to be purchased (pounds)	3872	4360	4380
Material price per pound	$              3	$                 3	$                3
Budgeted Cost of direct material purchases	$     11,616	$        13,080	$       13,140

Ending Inventory is 40% of next month production needs
Ending inventory for June is analysed from chart given above which shows 1800, therefore production for July = 1800/40% = 4500 units
Beginning Inventory is taken as 40% of current months production needs

2.

Direct Material budget
	April	May	June
Budgeted Production (Units)	880	1100	1075
Material required per unit (Pounds)	4	4	4
Materials needed for production	3520	4400	4300
Add : Desired Ending Inventory	1540	1505	1575
Total Material Requirements (Pounds)	5060	5905	5875
Less : Beginning Inventory	1408	1540	1505
Materials to be purchased (pounds)	3652	4365	4370
Material price per pound	$              3	$                 3	$                3
Budgeted Cost of direct material purchases	$     10,956	$        13,095	$       13,110

Budgeted cost for april will come down, as less material is required to be purchased