Question & Answer: Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for first 3 months…..

Patrick inc. makes industrial solvents

snould be produced each month as well a,,。 ot Exercise 9-23 Preparing a Direct Materials Purchases Budget trick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for E Brief the first 3 months of the coming year is: January February March 43,800 41,000 50,250 Each drum that requires 5.5 gallons of chemicals and one plastic drum. Company policy requires ending inventories ofraw materials for each month be 15% of the next months production hat policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is $2.00. The cost of one drum is $1.60. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar.) Required: 1. Calculate the ending inventory of chemicals in gallons for December of the prior year and for January and February. What is the beginning inventory of chemicals for January? Prepare a direct materials purchases budget for chemicals for the months of January and February 2. 3. Calculate the ending inventory of drums for December of the prior year and for January 4 Prepare a direct materials purchases budget for drums for the months of January and and February. February

Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for first 3 months of the coming year is: Each drum that requires 5.5 gallons of chemicals and one plastic drum. Company policy requires ending inventories of raw materials for each month be 15% of the next month’s production needs. That policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is $2.00. The cost of one drum is $1.60. Required: 1. Calculate the ending inventory of chemicals in gallons for December of the prior year and for January and February. What is the beginning inventory of chemicals for January? 2. Prepare a direct materials purchases budget for chemicals for the months of January and February. 3. Calculate the ending inventory of drums for December of the prior year and for January and February. 4. Prepare a direct materials purchases budget for drums for the months of January and and February.

Expert Answer

CALCULATE ENDING INVENTORY OF DECEMBER, JANUARY & FEBRUARY :

December = 43800*5.5*15% = 36135

January = 41000*5.5*15% = 33825

February = 50250*5.5*15% = 41457

Beginning inventory for january is 36135

2) PREPARE DIRECT MATERIAL PURCHASE BUDGET FOR CHEMICAL : gallon

	JANUARY	FEBRUARY
Raw material for production	43800*5.5=240900	41000*5.5=225500
Add : Ending inventory	33825	41457
Total needs	274725	266957
Less: Beginning inventory	(36135)	(33825)
Gallon purchase	238590	233132
Rate per gallon	2	2
Purchase cost	477180	466264

3) CALCULATE ENDING INVENTORY OF DRUM :

December = 43800*15%=6570

January = 41000*15%=6150

February = 50250*15%=7538

4) PREPARE DIRECT MATERIAL PURCHASE BUDGET :DRUM

	January	february
drum for production	43800	41000
Add:Ending inventory	6150	7538
Total needs	49950	48538
Less : Beginning inventory	(6570)	(6150)
material purchase	43380	42388
rate per drum	1.6	1.6
purchase cost	69408	67821

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