Yem expects to produce 1 comma 750 units in January and 2 comma 120 units in February. The company budgets 5 pounds per unit of direct materials at a cost of $ 45 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 5 comma 300 pounds. Yem desires the ending balance in Raw Materials Inventory to be 40% of the next month's direct materials needed for production. Desired ending balance for February is 4 comma 000 pounds. Prepare Yem's direct materials budget for January and February.

Instructions are below.

Explanation:

Giving the following information:

Production:

January= 1,750 units

February= 2,120 units

The company budgets 5 pounds per unit of direct materials at a cost of $ 45 per pound.

Beginning inventory= 5,300 pounds.

Desired ending inventory= 40% of the next month's direct materials needed for production.

The desired ending balance for February is 4,000 pounds.

The purchases of direct material are calculated using the following formula:

Purchases= sales + desired ending inventory - beginning inventory

January (in pounds):

Production= 1,750*5= 8,750

Desired ending inventory= (2,120*5)*0.4= 4,240

Beginning inventory= (5,300)

Total purchase= 7,690 pounds

Total cost= 7,690*45= $346,050

February (in pounds):

Production= 2,120*5= 10,600

Desired ending inventory= 4,000

Beginning inventory= (4,240)

Total purchase= 10,360 pounds

Total cost= 10,360*45= $466,200

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