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Perine Company- direct materials budget for January

Perine Company has 4,500 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,500 and 5,700 units, respectively. 5 pounds of raw materials are needed for each unit, and the estimated cost per pound is $8. Management desires an ending inventory equal to 20% of next month’s materials requirements. Prepare the direct materials budget for January.

Solution:

Perine Company
Direct Materials Budget
 For the Month Ending January 31, 2020
Units to be Produced             4,500
Direct Materials per Unit                      5
Total Pound Required for Production           22,500
Add: Desired Ending Inventory             5,700
Total Materials Required           28,200
Less: Beginning Materials Inventory           (4,500)
Direct Material Purchases           23,700
Cost Per Unit                      8
Total Cost of Direct Materials Purchases         189,600

Calculation of Raw Material Inventory:

Ending Raw Material Inventory = 5,700 x 5 x 20% = 5,700

Beginning Raw Material Inventory = 4,500 x 5 x 20% = 4,500

Perine Company has 4,500 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,500 and 5,700 units, respectively. 5 pounds of raw materials are needed for each unit, and the estimated cost per pound is $8. Management desires an ending inventory equal to 20% of next month's materials requirements. Prepare the direct materials budget for January.

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