Graham 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 third quarter?

Question

Quizplus · Accepted Answer

To calculate the budgeted direct materials purchases for the third quarter, first determine the total material requirement for the quarter: 17,000 units * 3 pounds/unit = 51,000 pounds. The beginning inventory for the third quarter should be 30% of the third quarter's requirement: 51,000 pounds * 30% = 15,300 pounds. The ending inventory for the third quarter should be 30% of the fourth quarter's requirement: 24,000 units * 3 pounds/unit * 30% = 21,600 pounds. Therefore, the budgeted purchases are: (51,000 pounds - 15,300 pounds) + 21,600 pounds = 57,300 pounds.

Graham Corporation's Budget Calls for the Following Production