DIRECT MATERIALS PURCHASES BUDGET Lester Company produces a variety of labels, including iron-on name labels, which are sold to parents of camp-bound children. (The camps require campers to have their name on each article of clothing.) The labels are sold in a roll of 1,000, which requires about 25 yards of paper strip. Each yard of paper strip costs $0.17. Lester has budgeted production of the label rolls for the next four months as follows:

Units March 5,000 April 25,000 May 35,000 June 6,000 Inventory policy requires that sufficient paper strip be in ending monthly inventory to satisfy 20 percent of the following month’s production needs. The inventory of paper strip at the beginning of March equals exactly the amount needed to satisfy the inventory policy.

Required:

Prepare a direct materials purchases budget for March, April, and May, showing purchases in units and in dollars for each month and in total.

Exercise