Each unit requires 2 pounds of direct materials, which cost $6 per pound. the company’s policy is to maintain direct materials inventory equal to 20% of the next month’s direct materials requirement. as of june 30, the company has 2,040 pounds of direct materials in inventory, which complies with the policy. prepare a direct materials budget for july.

Budgeted Raw Material to be consumed in July.

Quantity         Price per pound             Total

10,200                 $6                             $61,200

Explanation:

As for the information provided, the material at month end in hand shall be:

20% of upcoming month's sale.

If in June at month end, the inventory in hand = 2,040 pounds of raw material.

Then, this represents 20% of total requirement of July.

Therefore, total requirement in July =

This basically means:

Total inventory required =

Quantity         Price per pound             Total

10,200                 $6                             $61,200

it should be