YadaYada expects to produce 1 comma 9501,950 units in JanuaryJanuary and 2 comma 1702,170 units in FebruaryFebruary. The company budgets 22 pounds per unit of direct materials at a cost of $ 50$50 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on JanuaryJanuary 1 is 5 comma 6005,600 pounds. YadaYada desires the ending balance in Raw Materials Inventory to be 8080 % of the next month's direct materials needed for production. Desired ending balance for FebruaryFebruary is 4 comma 1004,100 pounds. Prepare YadaYada 's direct materials budget for JanuaryJanuary and FebruaryFebruary.

Instructions are below.

Explanation:

Giving the following information:

Production:

January = 1,950 units

February = 2,170 units

The company budgets 2 pounds per unit of direct materials for $50 per pound.

Beginning inventory = 5,600 pounds.

Yada desires the ending balance in Raw Materials Inventory to be 80% of the next month's direct materials needed for production. Desired ending balance for February is 4,100 pounds.

We need to use the following formula structure:

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

Direct material budget January (in pounds):

Production = 1,950*2 = 3,900

Desired ending inventory = (2,170*2) * 0.8 = 3,472

Beginning inventory = (5,600)

Total = 1,772

Total cost = 1,772*50 = $88,600

Direct material budget February (in pounds):

Production = 2,170*2 = 4,340

Desired ending inventory = 4,100

Beginning inventory = (3,472)

Total = 4,968

Total cost = 4,968*50 = $248,400