Fuqua Company's sales budget projects unit sales of part 198Z of 10,800 units in January, 12,700 units in February, and 13,200 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $4 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending finished goods inventory to equal 20% of the next month's expected unit sales. These goals were met at December 31, 2016. A: Prepare a projected budget for Jan and Feb 2017 B: Prepare a direct material budget for Jan 2017

Production Budget for January:

Required Production Units:

= Expected Unit Sales + Desired Ending Finished Goods Inventory - Beginning Finished Goods Inventory

= 10,800 + (12,700 * 20%) - (10,800 * 20%)

= 10,800 + 2,540 - 2,160

= 11,180

Production Budget for February:

Required Production Units:

= Expected Unit Sales + Desired Ending Finished Goods Inventory - Beginning Finished Goods Inventory

= 12,700 + (13,200 * 20%) - (12,700 * 20%)

= 12,700 + 2,640 - 2,540

= 12,800

(b) Direct material budget for Jan 2017:

Total Cost of Direct Materials Purchases:

= [Total Pounds needed for Production + Desired Pounds in Ending Direct Materials Inventory - Beginning Direct Materials (Pounds) ] * Cost per Pound

= { (11,180 * 3) + [ (12,800 * 3) * 40%] - [ (11,180 * 3) * 40%]} * 4

= [33,540 + 15,360 - 13,416] * 4

= 35,484 * 4

= $141,936