Moreno Industries has adopted the following production budget for the first 4 months of 2011.
Month Units Month Units
January 10,000 March 5,000
February 8,000 April 4,000


Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2010, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 30% of next month's production requirements.

Complete the direct materials purchases budget by month for the first quarter

Material Purchase Requirement

Dec Jan Feb Mar Apr
Production Requirement 10,000 8,000 5,000 4,000



3 pounds of raw 30,000 24,000 15,000 12,000
Material needed
Per unit
"Ending raw material bal
(30% of next month's req)" 7,200 4,500 3,600
Raw Material Required 37,200 28,500 18,600

"Less:
Opening raw material bal" 9,000 7,200 4,500
"Raw material purchase
in pounds" 28,200 21,300 14,100

"Raw material purchases in
$ (2$ per pound)" $56,400 $42,600 $28,200


Note:

The finished goods will be multiplied by the no. of pounds per unit of raw material to obtain
Raw material required.
The raw material to be purchased will be arrived at after subtracting opening inventory of raw
Material in hand, and also keeping the required 30% ending inventory balance.
This raw material purchase is then multiplied by rate per pound to achieve our result, the raw material purchases in USD.

Hope it helps.

Offeror.