Zortek Corp. budgets production of 470 units in January and 210 units in February. Each finished unit requires six pounds of raw material Z, which costs $2 per pound. Each month’s ending inventory of raw materials should be 30% of the following month’s budgeted production. The January 1 raw materials inventory has 120 pounds of Z. Prepare a direct materials budget for January.

Preparation of the direct material budget is presented below:

Explanation:

                                                Zortek Corp.

                                     Direct Materials Budget

                                  For Month Ended January 31

Budget production in units  470 units

Price of material per pound $2 per pound

Materials needed for production  $940

Add: Budgeted ending inventory (210 units × $2 per pound × 30%) 126 units

Total sum of  materials requirements  1,066 units

Less: Beginning inventory  120 pounds

Materials purchased 946 pounds

Price of material per pound$2 per pound

Total cost of direct materials purchases$1,892