Exercise - Direct Materials Purchases Budget
Tsiklauri Company produces plastic items, including plastic housing for humidifiers. Each housing requires 425 grams of plastic costing $0.34 per 10 grams. Tsiklauri moulds the plastic into the proper shape. Tsiklauri has budgeted production of the humidifiers for the next four months as follows:
Units
March 3,500
April 4,400
May 4,900
June 6,300
Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 20 percent of the following month's production needs. The inventory of plastic at the beginning of March equals exactly the amount needed to satisfy the inventory policy.
Required: Prepare a direct materials purchases budget for March, April, and May, showing purchases in units and in dollars for each month and in total.