Delray Manufacturing needs to better budget and analyze costs. While Delray has experienced high sales growth, it has struggled to effectively manage costs and inventories. Delray aims to end each month with direct materials inventory equal to 40% of next month’s production needs. Each finished unit requires 4 pounds of direct materials and 2 hours of direct labor. Delray budgets $12,000 of fixed overhead costs per month. A Tableau Dashboard is provided to aid our analysis.

Answer  and Explanation:

1.

Direct Material budget  

April MayJune

Budgeted Production (Units)88011001075

Material required per unit (Pounds)444

Materials needed for production352044004300

Add : Desired Ending Inventory176017201800

Total Material Requirements (Pounds)528061206100

Less : Beginning Inventory140817601720

Materials to be purchased (pounds)387243604380

Material price per pound$ 3$ 3 $  3

Budgeted Cost of direct material purchases$     11,616$        13,080$       13,140

Ending Inventory is 40% of next month production needs

Ending inventory for June can be analysed from chart given above which shows 1800, therefore production for July is = 1800/40% = 4500 units

Beginning Inventory is taken as 40% of current months

2.

Direct Material budget  

AprilMayJune

Budgeted Production (Units)88011001075

Material required per unit (Pounds)444

Materials needed for production352044004300

Add : Desired Ending Inventory154015051575

Total Material Requirements (Pounds)506059055875

Less : Beginning Inventory140815401505

Materials to be purchased (pounds)365243654370

Material price per pound$  3$   3$  3

Budgeted Cost of direct material purchases$     10,956$        13,095$    13,110

Budgeted cost for april will therefore down, as less material is required and needed to be purchased.