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30 April, 10:12

Zira Co. reports the following production budget for the next four months. April May June July Production (units) 582 610 616 596 Each finished unit requires four pounds of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month's production needs. Beginning raw materials inventory for April was 931 pounds. Assume direct materials cost $5 per pound. Prepare a direct materials budget for April, May, and June.

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  1. 30 April, 13:09
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production (units):

    April = 582

    May = 610

    June = 616

    July = 596

    Each finished unit requires four pounds of raw materials.

    Desired ending inventory = 40% of next month's production needs. Beginning raw materials inventory for April was 931 pounds.

    Assume direct materials cost $5 per pound.

    To calculate the purchases of raw material, we need to use the following formula for each month:

    Purchases = sales + desired ending inventory - beginning inventory

    April (in pounds):

    Production = (582*4) = 2,328

    Desired ending inventory = (610*4) * 0.4 = 976

    Beginning inventory = (931)

    Total pounds = 2,373

    Total cost = 2,373*5 = $11,865

    May (in pounds):

    Production = (610*4) = 2,440

    Desired ending inventory = (616*4) * 0.4 = 986

    Beginning inventory = (976)

    Total pounds = 2,450

    Total cost = 2,450*5 = $12,250

    June (in pounds):

    Production = (616*4) = 2,464

    Desired ending inventory = (596*4) * 0.4 = 954

    Beginning inventory = (986)

    Total pounds = 2,450

    Total cost = 2,432*5 = $12,160
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