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10 June, 02:31

Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It plans production of 240,000 units in the second quarter and 52,500 units in the third quarter. Raw material inventory is 43,200 pounds at the beginning of the second quarter. Other information follows:

Direct materials Each unit requires 0.60 pounds of a key raw material, priced at $175 per pound. The company plans to end each quarter with an ending inventory of materials equal to 30% of next quarter's budgeted materials requirements.

Prepare a direct materials budget for the second quarter.

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  1. 10 June, 05:57
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    Answer and Explanation:

    The Preparation of direct materials budget for the second quarter is prepared below:-

    Rida, Inc.,

    Direct materials budget

    For the second quarter

    Particulars Amount

    Production Unit 240,000

    Raw material per unit 0.60

    Raw material needed for production 144,000

    (240,000 * 0.60)

    Add: Desired ending inventory 9,450

    (52,500 * 0.6 * 30%)

    Total amount 153,450

    Less: Beginning inventory ($43,200)

    Direct material purchase $110,250

    Cost per pound $175

    Direct material purchase cost $19,293,750

    Therefore to reach at direct material purchase cost we simply multiply the direct material purchase cost with cost per pound.
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