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Lucy Company had 3660 pounds of direct material in inventory on Jan. 1. Required units of production for the first 3 quarters are shown in
Lucy Company had 3660 pounds of direct material in inventory on Jan. 1. Required units of production for the first 3 quarters are shown in #2 above. Three pounds of direct material are needed for each unit, and the estimated cost per pound is $5.50. Management requires an ending inventory (direct material) equal to 10% of next quarter's material production requirements. Prepare a direct materials budget for the first 2 quarters of 2021. Units to be Produced x DM per unit (pounds) Total pounds needed for production + Desired ending inventory Total Materials Required (pounds) - Beg. Inv. =DM Purchases (Pounds) x Unit Price Total Cost of DM Purchases Q1 Q2 Q1 Q2 Q3 Q4 Total Est. sales (Units) 12,000 14,500 16,000 19,000 61,500 x Est. price Total $60 $60 $60 $60 $60 $720,000 $870,000 $960,000 $1,140,000 $3,690,000 Esp. Units sales Q1 12,000 Q2 14,500| Q3 Q4 Total 16,000 +Desired End. FG === 14,500 x 8% 1,160 16,000 x 8% = 1,280 19,000 x 8% = 1,520 Total units available 13,160 15,780 17,520 Beg. FG 12,000 x 8% -960 -1,160 -1,280 Required units to produce 12,200 14,620 16,240
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