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17 February, 17:18

Zira co reports the following production budget for the next four months. April May June July Production (units) 664 705 697 677 Each finished unit requires six pounds of raw materials and the company wants to end each month with raw materials inventory equal to 20% of next month's production needs. Beginning raw materials inventory for april was 725 pounds. Assume direct materials cost $6 per pound. Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

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  1. 17 February, 20:12
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production:

    April = 664

    May = 705

    June = 697

    July = 677

    Each finished unit requires six pounds of raw materials.

    Ending inventory = 20% of next month's production needs.

    Beginning raw materials inventory for april was 725 pounds.

    Assume direct materials cost $6 per pound.

    To calculate the direct material requirements, we need to use the following formula:

    Purchases = production + desired ending inventory - beginning inventory

    April (pounds):

    Production = 664*6 = 3,984

    Ending inventory = (705*6) * 0.2 = 846

    Beginning inventory = (725)

    Total pounds = 4,105

    Total cost = 4,105*6 = $24,630

    May (pounds):

    Production = 705*6 = 4,230

    Ending inventory = (697*6) * 0.2 = 836

    Beginning inventory = (846)

    Total pounds = 4,220

    Total cost = 4,220*6 = $25,320

    June (pounds):

    Production = 697*6 = 4,182

    Ending inventory = (677*6) * 0.2 = 812

    Beginning inventory = (836)

    Total pounds = 4,158

    Total cost = 4,158*6 = $24,948
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