Exercise 7-4 Manufacturing: Direct materials budget LO P1

Hospitable Co. provides the following sales forecast for the next four months:

	April	May	June	July
Sales (units)	650	730	680	680

The company wants to end each month with ending finished goods inventory equal to 20% of next months sales. Finished goods inventory on April 1 is 130 units. Assume Julys budgeted production is 680 units. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 20% of next months production needs. Beginning raw materials inventory for April was 666 pounds. Assume direct materials cost $5 per pound.

Prepare a direct materials budget for April, May, and June.

HOSPITABLE CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted production (units)	666	720	680	units
Materials requirements per unit
Materials needed for production
Budgeted ending inventory (lbs.)		680	680
Total materials requirements
Beginning inventory (lbs.)
Materials to be purchased
Cost per lb	$5	$5	$5	per lbs.
Total cost