Passenger Car Truck
Rubber 35 lbs. per unit 78 lbs. per unit
Steel belts 5 lbs. per unit 8 lbs. per unit
The purchase prices of rubber and steel are $1.20 and $0.80 per pound, respectively.
The desired ending inventories of rubber and steel belts are 40,000 and 10,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 46,000 and 8,000 pounds, respectively.
Prepare a direct materials purchases budget for Safety Grip Company for the year ended December 31, 2014.
Answer:
SAFETY GRIP COMPANY Direct
Materials Purchases Budget
For the Year Ending December 31, 2014
Rubber Steel Belts Total
Pounds required for production:
Passenger tires 1,470,000 lbs.
1 210,000 lbs.
2
Truck tires 1,482,000 3 152,000 4
Plus desired inventory,
December 31, 2014 40,000 10,000
Total 2,992,000 lbs. 372,000 lbs.
Less estimated inventory,
January 1, 2014 46,000 8,000
Total units purchased 2,946,000 lbs. 364,000 lbs.
Unit price × $1.20 × $0.80
Total direct materials to be
purchased $3,535,200 $291,200 $3,826,400
1 Rubber: 42,000 units × 35 lbs. per unit = 1,470,000 lbs.
2 Steel belts: 42,000 units × 5 lbs. per unit = 210,000 lbs.
3 Rubber: 19,000 units × 78 lbs. per unit = 1,482,000 lbs.
4 Steel belts: 19,000 units × 8 lbs. per unit = 152,000 lbs.