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Maham Corporation's budget calls for the following production:
Quarter 1 = 22,500 units
Quarter 2 = 19,000 units
Quarter 3 = 17,000 units
Quarter 4 = 24,000 units
Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with 30% of that quarter's direct materials requirements. What would be the budgeted direct materials purchases in the second quarter?

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Parrain

Answer: 55,200 pounds

Explanation:

The required direct material for the second quarter is:

= 19,000 * 3

= 57,000 pounds

The Beginning inventory for the second quarter is 30% of what is required:

= 30% * 57,000

= 17,100

The ending inventory is 30% of the next quarter's requirement:

= 30% * (17,000 * 3)

= 15,300

Purchases for the second quarter = Direct materials required for production in Quarter 2 + Desired ending inventory for Quarter 2 - Beginning inventory for Quarter 2

= 57,000 + 15,300 - 17,100

= 55,200 pounds

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