Perine Company has 5,460 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,200 and 6,000 units, respectively. 5 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 26% of next month's materials requirements.

Prepare the direct materials budget for January.

Question

Business

Meghan Buchanan

3 February, 07:13

Perine Company has 5,460 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,200 and 6,000 units, respectively. 5 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 26% of next month's materials requirements.

Prepare the direct materials budget for January.

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Answers (1)

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Alison Valencia · Answer 1

Instructions are below.

Explanation:

Giving the following information:

Beginning inventory = 5,460 pounds of raw materials

Production:

January = 4,200 units

February = 6,000 units

5 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6.

Management desires an ending inventory equal to 26% of next month's materials requirements.

Direct material budget = production + desired ending inventory - beginning inventory

Direct material budget (in pounds):

Production = 4,200*5 = 21,000

Desired ending inventory = (6,000*5) * 0.26 = 7,800

Beginning inventory = (5,460)

Total = 23,340

Total cost = 23,340*6 = $140,040