5 5 5 5 5 Direct Materials Budget Service Shoe Company is off to a great budgeting start!! We have put together a sales budget, so we know how many pairs of our amazing running shoes we intend to sell, then we created a production budget, so now we know how many we need to produce each quarter to meet sales and finished inventory needs! In order to complete this budget, let's look at a few pieces of important information. Let's assume we are showing 250 units of raw material in our ending inventory coming into the new year and desired ending raw material inventory of 500 units for each quarter in the new year. Each pair of shoes we make requires 5 units of raw materials . Let's also note that our buyer has secured a price for our raw material of $2 per unit for the entire year! Yeah to our buyer for doing great work on an annual contract! This will certainly help us in our budgeting process right? What is the cost of raw material to be purchased in Second Quarter and Fourth Quarter? Direct Materials Budget Required production in pairs 2,050 Units of raw material needed per pair Units of raw material needed to meet production 10,250 Desired ending raw material inventory 500 500 500 500 500 Total units of raw materials needed 10,750 units in beginning raw material inventory 250 500 500 500 250 Units of raw materials to be purchases 10,500 Cost of raw material per unit Cost of raw material to be purchased 21,000 $5,000 and $ 6,000 O None of these O $5,500 and $ 6,000 O $5,500 and $5,000 2