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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Preparing a Direct Materials Purchases Budget

Tulum Inc. makes a Mexican chocolate mix sold in 4-pound boxes. Planned production in units for the first 3 months of the coming year is:

Chapter 9, Problem 37BEB, Preparing a Direct Materials Purchases Budget Tulum Inc. makes a Mexican chocolate mix sold in

Each box requires 4.2 pounds of chocolate mix and one box. Company policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. That policy was met for the ending inventory of December in the prior year. The cost of 1 pound of chocolate mix is $1.50. The cost of one box is $0.10. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar.)

Required:

  1. 1. Calculate the ending inventory of chocolate mix in pounds for December of the prior year and for January and February. What is the beginning inventory of chocolate mix for January?
  2. 2. Prepare a direct materials purchases budget for chocolate mix for the months of January and February.
  3. 3. Calculate the ending inventory of boxes for December of the prior year and for January and February.
  4. 4. Prepare a direct materials purchases budget for boxes for the months of January and February.

1.

To determine

Compute closing inventory for the month of December, January, and February.

Explanation

Direct Material Purchases Budget:

Direct material purchases budget is a part of operating budget. Direct material purchases budget is prepared by adding materials required at the end and subtracting material available in the beginning, to the material required for production within the period.

Computation of ending inventory for the month of December, January, and February:

ParticularsDecemberJanuaryFebruaryMarch
Expected units of production 24,70022,00030,200
Material required for production (Expectedunits×4

2.

To determine

Present material purchase budget for solvent for the month of January and February.

3.

To determine

Compute closing inventory of drum for the month of December, January, and February.

4.

To determine

Present material purchase budget for drums for the month of January and February.

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