YadaYada expects to produce 1 comma 9501,950 units in JanuaryJanuary and 2 comma 1702,170 units in FebruaryFebruary. The company budgets 22 pounds per unit of direct materials at a cost of $ 50$50 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on JanuaryJanuary 1 is 5 comma 6005,600 pounds. YadaYada desires the ending balance in Raw Materials Inventory to be 8080% of the next month's direct materials needed for production. Desired ending balance for FebruaryFebruary is 4 comma 1004,100 pounds. Prepare YadaYada's direct materials budget for JanuaryJanuary and FebruaryFebruary.

Instructions are below.

Explanation:

Giving the following information:

Production:

January= 1,950 units

February= 2,170 units

The company budgets 2 pounds per unit of direct materials for $50 per pound.

Beginning inventory= 5,600 pounds.

Yada desires the ending balance in Raw Materials Inventory to be 80% of the next month's direct materials needed for production. Desired ending balance for February is 4,100 pounds.

We need to use the following formula structure:

Direct material budget= production + desired ending inventory - beginning inventory

Direct material budget January (in pounds):

Production= 1,950*2= 3,900

Desired ending inventory= (2,170*2)*0.8= 3,472

Beginning inventory= (5,600)

Total= 1,772

Total cost= 1,772*50= $88,600

Direct material budget February (in pounds):

Production= 2,170*2= 4,340

Desired ending inventory= 4,100

Beginning inventory= (3,472)

Total= 4,968

Total cost= 4,968*50= $248,400

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