Bell expects to produce 1 comma 800 units in January and 2 comma 155 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $ 10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 4 comma 950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20 % of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 860 pounds. Prepare Bell 's direct materials budget for January and February.

Instructions are below.

Explanation:

Giving the following information:

Production:

January = 1,800 units

February = 2,155 units

The company budgets 3 pounds per unit of direct materials at a cost of $ 10 per pound.

Beginning inventory = 4,950 pounds.

Desired ending inventory = 20 % of the next month's direct materials needed for production.

Desired ending balance for February is 4,860 pounds.

To calculate purchases, we need to use the following formula:

Purchases = production + desired ending inventory - beginning inventory

January (in pounds):

Production = 1,800*3 = 5,400

Desired ending inventory = (2,155*3) * 0.2 = 1,293

Beginning inventory = (4,950)

Total = 1,743

Total cost = 1,743*10 = $17,430

February (in pounds):

Production = 2,155*3 = 6,465

Desired ending inventory = 4,860

Beginning inventory = (1,293)

Total = 10,032

Total cost = 10,032*10 = $100,320