Preparing a Direct Materials Purchases Budget
Sheet1
| Preparing a Direct Materials Purchases Budget | |||
| Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is: | |||
| DATA | |||
| January | 42,400 | ||
| February | 40,400 | ||
| March | 49,500 | ||
| Direct materials needed per unit: | |||
| Chemicals (in gallons) | 5.5 | ||
| Plastic drums | 1 | ||
| Direct materials cost: | |||
| Chemicals (per gallon) | $1.90 | ||
| Plastic drums (per unit) | $1.50 | ||
| Ending inventory requirements | 25% | of next month’s production needs of raw materials | |
| That ending inventory policy was met for the ending inventory of December in the prior year. | |||
| REQUIRED: | |||
| 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? | |||
| Using formulas and cell references from the problem data, perform the required analysis. | |||
| Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading. | |||
| Formulas | |||
| Ending inventory in gallons for December | |||
| Ending inventory in gallons for January | |||
| Ending inventory in gallons for February | |||
| Beginning inventory in gallons for January | |||
| REQUIRED: | |||
| Prepare a direct materials purchases budget for chemicals for the months of January and February. | |||
| 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 | |||
| Formulas | |||
| January | February | ||
| REQUIRED: | |||
| Calculate the ending inventory of drums for December of the prior year and for January and February. | |||
| Formulas | |||
| Ending inventory in drums for December | |||
| Ending inventory in drums for January | |||
| Ending inventory in drums for February | |||
| REQUIRED: | |||
| Prepare a direct materials purchases budget for drums for the months of January and February. | |||
| 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 | |||
| Formulas | |||
| January | February | ||
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