Zortek Corp. budgets production of 470 units in January and 210 units in February. Each finished unit requires six pounds of raw material Z, which costs $2 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The January 1 raw materials inventory has 120 pounds of Z. Prepare a direct materials budget for January.

Question

Business

Kendall Humphrey

15 November, 00:55

Zortek Corp. budgets production of 470 units in January and 210 units in February. Each finished unit requires six pounds of raw material Z, which costs $2 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The January 1 raw materials inventory has 120 pounds of Z. Prepare a direct materials budget for January.

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Sabrina Reed · Answer 1

Preparation of the direct material budget is presented below:

Explanation:

Zortek Corp.

Direct Materials Budget

For Month Ended January 31

Budget production in units 470 units

Price of material per pound $2 per pound

Materials needed for production $940

Add: Budgeted ending inventory (210 units * $2 per pound * 30%) 126 units

Total sum of materials requirements 1,066 units

Less: Beginning inventory 120 pounds

Materials purchased 946 pounds

Price of material per pound $2 per pound

Total cost of direct materials purchases $1,892