| Preparing a Direct Materials Purchases Budget |
| Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is: |
| DATA |
| January |
42,400 |
| February |
40,400 |
| March |
49,500 |
| Direct materials needed per unit: |
| Chemicals (in gallons) |
5.5 |
| Plastic drums |
1 |
| Direct materials cost: |
| Chemicals (per gallon) |
$1.90 |
| Plastic drums (per unit) |
$1.50 |
| Ending inventory requirements |
25% |
of next month’s production needs of raw materials |
| That ending inventory policy was met for the ending inventory of December in the prior year. |
| REQUIRED: |
| Calculate the ending inventory of chemicals in gallons for December of the prior year and for January and February. What is the beginning inventory of chemicals for January? |
| Using formulas and cell references from the problem data, perform the required analysis. |
| Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading. |
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Formulas |
| Ending inventory in gallons for December |
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| Ending inventory in gallons for January |
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| Ending inventory in gallons for February |
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| Beginning inventory in gallons for January |
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| REQUIRED: |
| Prepare a direct materials purchases budget for chemicals for the months of January and February. |
| Patrick Inc. |
| Direct Materials Purchases Budget – Chemicals in Gallons |
| For the Months of January and February |
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January |
February |
| Production in units |
| Gallons per unit |
| Gallons for production |
| Desired ending inventory |
| Needed |
| Less: Beginning inventory |
| Purchases |
| Price per gallon |
| Dollar purchases |
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Formulas |
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January |
February |
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| REQUIRED: |
| Calculate the ending inventory of drums for December of the prior year and for January and February. |
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Formulas |
| Ending inventory in drums for December |
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| Ending inventory in drums for January |
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| Ending inventory in drums for February |
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| REQUIRED: |
| Prepare a direct materials purchases budget for drums for the months of January and February. |
| Patrick Inc. |
| Direct Materials Purchases Budget – Drums |
| For the Months of January and February |
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January |
February |
| Production in units |
| Drums per unit |
| Drums for production |
| Desired ending inventory |
| Needed |
| Less: Beginning inventory |
| Purchases |
| Price per drum |
| Dollar purchases |
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Formulas |
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January |
February |
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