Delray Manufacturing needs to better budget and analyze costs. While Delray has experienced high sales growth, it has struggled to effectively manage costs and inventories. Delray aims to end each month with direct materials inventory equal to 40% of next months production needs. Each finished unit requires 4 pounds of direct materials and 2 hours of direct labor. Delray budgets $12,000 of fixed overhead costs per month. A Tableau Dashboard is provided to aid our analysis. Ending Direct Materials Inventory by Month

March

April

May

June

Direct Materials (Pounds)

0

400

800

1200

1600

2000

Direct labor rate

Direct materials cost

Variable overhead rate

Sales Forecast & Production Budget (in Units)

Prepare a direct materials budget for each month of April, May, and June. 2. Assume the company decides to end each month with direct materials inventory equal to 35% of next months production needs, instead of 40%. How will this decision impact the budgeted cost of direct materials for April?