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    Preparing a Direct-Material Purchases Budget

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    Ocean Waverunners plans to produce 20,000 units, 24,000 units, and 30,000 units, respectively, in October, November, and December. Each of these units requires four units of part no. 879, which the company can purchase for $7 each. Ocean Waverunner has 35,000 units of part no. 879 in stock on September 30. Management desires to maintain an ending raw-material inventory equal to 40% of the following month's production usage.

    Prepare a direct-material purchases budget for October in parts and dollars.

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    Solution Summary

    The solution contains an attached MS Excel spreadsheet of the direct-materials purchases budget for the Ocean Waverunners exercise.