Brief Exercise 9-4 Perine Company has 1,640 pounds of raw materials in its December 31, 2019, ending inventory. Required production for January and February of 2020 are 4,100 and 5,600 units, respectively. 2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 20% of next month’s materials requirements. Prepare the direct materials budget for January.

Total cost= $140,800

Explanation:

Giving the following information:

Beginning inventory= 1,640 pounds

Required production:

January= 4,100 units

February= 5,600 units

2 pounds of raw materials are needed for each unit, and the estimated cost per pound is $6.

Management desires an ending inventory equal to 20% of next month’s materials requirements.

First, we will determine the required direct material pounds for January:

Budgeted direct material:

Sales= 4,100*2= 8,200 pounds

Ending inventory= (5,600*2)*0.20= 2,240

Beginning inventory= (1,640)

Total= 8,800

Total cost= 8,800*16= $140,800

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