Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 37

Production and Materials Purchases Budgets DeVaris Corporation’s budget calls for the following sales for next year:

Quarter 1	45,000 units	Quarter 3	34,000 units
Quarter 2	38,000 units	Quarter 4	48,000 units

Each unit of the product requires 3 pounds of direct material. The company’s policy is to begin each quarter with an inventory of the product equal to 10 percent of that quarter’s sales requirements and an inventory of direct materials equal to 20 percent of that quarter’s direct materials requirements for production.

Required Determine the production and materials purchases budgets for the second quarter.

Step 1 of 2

Material purchase budget is the budget that tells about the amount of materials that are needed to be purchased in given time period as per the budget. Production budget is a budget which tells about the production planning in given time period.