E $5-7$ Direct Materials Budgeting

Shanahan Corporation produces three types of media: CDs$,$ DVDs$,$ and double$-$layer

DVDs$.$ Shanahan purchases cases for the media from a firm in Mexico and purchases

the labels from another supplier in Brazil. The following materials are required for

production:

CD DVD Double Layer DVD

Cases $ $1\mathrm{.}75$ $ $2\mathrm{.}30$ $ $3\mathrm{.}05$

Labels $2\mathrm{.}502\mathrm{.}502\mathrm{.}00$

Beginning inventory for Shanahan is $5,000,7,000,$ and $3,500$ cases for CDs$,$ DVDs$,$ and

double layer DVDs$,$ respectively. Management wants to have $5,000$ CD and double

layer DVD cases and $2,500$ DVD cases in ending inventory. Projected sales for the first

half of $20$X$1$ are $40,000$ CD cases, $21,000$ DVD cases, and $14,000$ double layer DVD

cases.

Shanahan$$s policy is to pay $80\%$ of its accounts with suppliers by the end of each half

year. The balance in accounts payable on January $1,20$X$1,$ is $$55,000.$

$1.$ Prepare a budget for direct materials purchases for the first half of $20$X$0.$

$2.$ Prepare a budget for payments to direct materials suppliers for the first half of

$20$X$0.$