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g The following facts are known: • The total pounds needed for production are 2 times the units to be produced. • The desired ending direct materials inventory is 20% of the total pounds needed for production. • The beginning direct materials inventory is equal in number to 10% of the units to be produced. • Cost per pound is $5. • Total cost of the direct materials purchases is $1,035,000. Prepare a direct materials budget for the period.

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Answer and Explanation:

The Preparation of direct material budget is shown below:-

                      Direct Material budget  

Particulars                            Amount              

Units to be produced          $90,000   Y

Material per unit                      2  

Total pounds needed for

production M                    $180,000 2Y

Add: Desired ending Direct

Material Inventory 20%    $36,000 (.2 × 2Y = .4Y)

Total Material requirement $216,000 (2.4Y )

Less: beginning Raw material

Inventory                             $9,000  (.1Y)

Material to be purchased

Account                             $207,000 (2.3Y)

Cost per pound C               $5

Total cost of direct Material

Purchases A                        $1,035,000  

2Y + .4Y - .1Y = $207,000

Y = $207,000 ÷ 2.3               $90,000

The Total cost of direct Material is $90,000.

"Direct Material budget"

The Preparation of direct material budget is shown below:-

Production

Production= Units to be  produce*Amount

Production=90000*2

Production=1,80,000

Direct Material

Inventory = Production* 20%

Inventory =180000*20%

Inventory =$36,000

Total Material requirement =$216,000

Less: beginning Raw material

Inventory $9,000

Material to be purchased =2,07,000

Total cost of direct Material

Total cost of direct Material=Material to be purchased*Cost per pound

Total cost of direct Material=$207,000*$5

Total cost of direct Material= $1,035,000  

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