Question

Breadmaster produces organic bread that is sold by the loaf. Each loaf requires 1/2 of a pound of flour. The bakery pays $2.00 per pound of the organic four used in its loaves. The bakery expects to produce the following number of loaves in each of the upcoming four months (Click the icon to view the units to be produced.) The bakery has a policy that it will have 20% of the following month's flour needs on hand at the end of each month. At the end of June, there were 154 pounds of flour on hand. Prepare the direct materials budget for the third quarter, with a column for each month and for the quarter. Begin the direct materials budget by determining the total quantity needed, then complete the budget. (Enter the pounds per unit as a decimal to two places. Round your calculations to the nearest whole number.) Breadmaster Direct Materials Budget For the Months of July through September July August September Quarter Units to be produced Multiply by: Pounds of four needed per unit Quantity needed (lbs) for production Plus: Desired ending inventory of direct materials Total quantity (lbs) needed Enter any number in the edit fields and then click Check Answer.

Answer 1

Solution

BreadMaster

1. Direct Materials Budget

Breadmaster
Direct Materials Budget
For the Months of July through September
	July	August	September	Quarter
Units to be produced	1,540	1,820	1,660	5,020
flour needed in pounds	0.5	0.5	0.5	0.5
Quantity needed for production (pounds)	770	910	830	2,510
add: desired ending inventory of direct materials	182	166	146
total quantity needed (pounds)	952	1,076	976
Less: beginning inventory of direct materials	154	182	166
total quantity needed to produce (pounds)	798	894	810	2,502
cost per pounds	$2	$2	$2	$2
Total cost of direct material purchases	$1,596	$1,788	$1,620	$5,004

Computations:

1. Quantity needed in pounds = half pound per unit

July = 1,540 loaves x 0.5 pounds = 770 pounds

August = 1,820 loaves x 0.5 pounds = 910 pounds

September = 1,660 loaves x 0.5 pounds = 830 pounds

2. Desired ending inventory of direct materials = 20% of next month’s needs

July = 20% x August’s needs = 0.2 x 910 = 182pounds

August = 20% x Sept’s needs = 0.2 x 830 = 166 pounds

September = 20% x October’s needs = 20% x (1,460 loaves x 0.5 pounds) = 146 pounds

3. Beginning inventory of direct materials = ending inventory of previous month

July = 20% of July needs = 0.2 x 770 = 154 pounds

August = ending inventory of July = 182 pounds

September = ending inventory of August = 166 pounds

4. Total cost of direct material purchases = cost per pound x total quantity needed to produce