Reference no: EM132338474
Question :
Dorothy Industries has adopted the following production budget for the first four months of 2019:
|
Month
|
Units
|
Month
|
Units
|
|
January
|
11,000
|
March
|
6,000
|
|
February
|
9,000
|
April
|
5,000
|
Each unit requires five kilograms of raw materials costing $ 2.00 per kilogram. On December 31, 2018, the ending raw materials inventory was 10,000 kilograms. Management wants to have a raw materials inventory at the end of the month equal to 30% of the next month's production requirements.
Required:
Prepare a direct materials purchases budget by months for the first quarter.
High company prepares monthly cash budgets. Relevant data from operating budgets for 2019 follow:
|
|
January
|
February
|
|
Sales
|
$350,000
|
$400,000
|
|
Direct materials purchases
|
120,000
|
130,000
|
|
Direct labour
|
80,000
|
100,000
|
|
Manufacturing overhead
|
70,000
|
75,000
|
|
Selling and administrative expenses
|
89,000
|
91,000
|
All sales are on account. Collections are expected to be 45% on the month of sale, 30% in the first month following the sales, and 25% in the second month following the sale. Sixty percent of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase.
All other items above are paid in the month incurred. Selling and administrative expenses include $4,000 of depreciation per month.