Perine Company has 5,220 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,500 and 5,900 units, respectively. 4 pounds of raw materials are needed for each unit, and the estimated cost per pound is $7. Management desires an ending inventory equal to 29% of next month's materials requirements. Prepare the direct materials budget for January.

Question

Business

Olivia Espinoza

14 May, 03:03

Perine Company has 5,220 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,500 and 5,900 units, respectively. 4 pounds of raw materials are needed for each unit, and the estimated cost per pound is $7. Management desires an ending inventory equal to 29% of next month's materials requirements. Prepare the direct materials budget for January.

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Kaylynn Buckley · Answer 1

Instructions are below.

Explanation:

Giving the following information:

Beginning inventory = 5,220 pounds

Production:

January = 4,500 units

February = 5,900 units

4 pounds of raw materials are needed for each unit

The estimated cost per pound is $7.

Management desires an ending inventory equal to 29% of next month's materials requirements.

First, we need to calculate the number of pounds needed for each month:

January = 4,500*4 = 18,000 pounds

February = 5,900*4 = 23,600 pounds

Direct material budget January:

Production = 18,000

Desired ending inventory = (0.29*23,600) = 6,844

Beginning inventory = (5,220)

Total pounds = 19,624

Total cost = 19,624*7 = $137,368