Direct Materials Purchases and Direct Labor Budgets. Specialty Products, Inc., produces fire retardant tarps. The company expects to produce 8,320 units in the first quarter, 13,260 units in the second quarter, 15,080 units in the third quarter, and 11,260 units in the fourth quarter (this information is derived from the previous exercise). With regards to direct materials, each unit of product requires 8 yards of material, at a cost of $4 per yard. Management prefers to maintain ending raw materials inventory equal to 15 percent of next quarters materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 14,000 yards. With regards to direct labor, each unit of product requires 3 labor hours at a cost of $16 per hour. Required: Prepare a direct materials purchases budget for Specialty Products, Inc., using a format similar to Figure 9.5.

a. Specialty Products, Inc. Direct Materials Purchases Budget Year Ending December 31 Quarter Units to be produced (from production budget) Materials required per unit (yards) Materials needed in production Add desired ending inventory Materials needed in inventory Deduct beginning inventory Direct materials to be purchased (yards) Cost of materials per yard Cost of materials to be purchased Direct materials cost per unit