Yogi expects to produce 1 comma 700 units in January and 2 comma 180 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $ 15 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 5 comma 200 pounds. Yogi desires the ending balance in Raw Materials Inventory to be 60 % of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 300 pounds. Prepare Yogi 's direct materials budget for January and February.

Answer and Explanation:

The Preparation of Yogi 's direct materials budget for January and February is shown below:-

Direct material budget

Two months ended Jan 31 and Feb 28

January February

Budgeted units to be produced a 1,700 2,180

Direct material pounds per unit b 3 3

Direct materials needed for

production (c = a * b) 5,100 6,540

Add: Desired direct material

in ending inventory (pounds) d 3,060 4,300

(5,100 * 0.6)

Total direct materials needed 8,160 10,840

(e = c + d)

Less: Direct material beginning in

inventory (pounds) f 5,200 3,060

Budgeted purchase of direct

material g = e - f 2,960 7,780

Direct material cost per pound h $15 $15

Budgeted cost of direct material

purchases i = g * h $44,400 $116,700