Preparing a Direct Materials Purchases

Budget Patrick Inc. makes industrial solvents sold in 5-gallon drum containers. Planned production in units for the first 3 months of the coming year is: January 43,800 February 41,000 March 50,250 Each drum requires 5.5 gallons of chemicals and one plastic drum container. Company policy requires that ending inventories of raw materials for each month be 15% of the next month's production needs. That policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is $2.00. The cost of one drum is $1.60.

Required:

1. Calculate the ending inventory of chemicals in gallons for December of the prior year, and for January and February.

What is the beginning inventory of chemicals for January? Round your answers to the nearest whole gallon. Ending inventory for December ------ gallons

Ending inventory for January ------gallons

Ending inventory for February -------gallons

Beginning inventory for January ------- gallons

2. Prepare a direct materials purchases budget for chemicals for the months of January and February. Do not include a multiplication symbol as part of your answer.

Patrick Inc. Direct Materials Purchases

Budget - Chemicals in Gallons For the Months of January and February January February

Production in units Gallons per unit Gallons for production

Desired ending inventory Needed

Less: Beginning inventory

Purchases Price per gallon $

Dollar purchases $ $

3. Calculate the ending inventory of drums for December of the prior year, and for January and February. Round your answers to the nearest whole unit.

Ending inventory for December -----units

Ending inventory for January ------units

Ending inventory for February -------units

4. Prepare a direct materials purchases budget for drums for the months of January and February. Do not include a multiplication symbol as part of your answer.

Patrick Inc. Direct Materials Purchases

Budget - Drums For the Months of January and February January February

Production in units Drums per unit

Drums for production

Desired ending inventory Needed

Less: Beginning inventory

Purchases Price per drum $ $

Dollar purchases $ $