Answered: Direct Materials Purchases Budget…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 11E

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Question

Direct Materials Purchases Budget

Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 21 ounces of plastic costing $0.1 per ounce. Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows:

	Units
July	3,500
August	4,400
September	4,900
October	6,300

Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 30% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy.

Required:

Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total. If required, round the total purchase cost to nearest whole value.

Langer Company
Direct Materials Purchases Budget
For July, August and September
July
August September
Total
Units to be produced
Direct materials per unit (ounces)
Production needs
Desired ending inventory (ounces)
Total needs
Less: Beginning inventory
Direct materials to be purchased (ounces)
Cost per ounce
$0.1
$0.1
$0.1
$0.1
Total purchase cost

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