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Direct Materials Budget Example

Explore direct materials budget example.

The Direct Materials Budget

  • At Royal Company, five pounds of material are required per unit of product.
  • Management wants materials on hand at the end of each month equal to 10% of the following month’s production.
  • On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound.

Example

Production: April 26k, May 46k, June 29k, Q 101k. Material per unit (pounds): April 5, May 5, June 5, Q 5. Production needs: April 130k, May 230k, June 145k, Q 505k. Add: Desired ending inventory: April 23k, May 14.5k, June 11.5k, Q 11.5k. Total needed: April 153k, May 244.5k, June 156.5k, Q 516.5k. Less: Beginning inventory: April 13k, May 23k, June 14.5k, Q 13k. Materials to be purchased: April 140k, May 221.5k, June 142k, Q 503.5k

Over to you

Review the example and make sure to understand how to create a Direct Material budget.

 

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