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Floyd Manufacturing expects to produce 2,900 units in January and 3,600 units in February. Floyd budgets $20 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $38,650. The company desires the ending balance in Raw Materials Inventory to be 10% of the next month's direct materials needed for production. Desired ending balance for February is $51,100. What is the cost of budgeted purchases of direct materials needed for January?

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Solution Summary

The solution is provided in an excel sheet. If you click on any cell, you will see the formula used to calculate the figure.
The solution is provided using cell references which means that if you change the given data (inputs), excel would automatically calculate the solution.

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Manal Elkhoshkhany, MBA
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  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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