Q11RQ

Question

What is the formula used to determine the amount of direct materials to be purchased?

Step-by-Step Solution

Verified

Answer

The purchasing department uses the amount estimated from the direct materials budget.

1Step 1: Meaning of Direct Materials Budget

The direct materials budget shows how much the raw material is needed to be purchased to fulfill the company's production requirement.

2Step 2:Formula used to determine the number of units to be produced

$\begin{matrix} B u d g e t e d c o s t o f d i r e c t m a t e r i a l s p u r c h a s e s = B u d g e t e d u n i t s t o b e p r o d u c e d \times D i r e c t m a t e r i a l s (p o u n d s) p e r u n i t \\ + D e s i r e d d i r e c t m a t e r i a l s i n e n d i n g i n v e n t o r y (p o u n d s) \\ - D i r e c t m a t e r i a l s i n b e g i n n i n g i n v e n t o r y (p o u n d s) \times D i r e c t m a t e r i a l s c o s t p e r p o u n d \end{matrix}$

Q10RQ

Q12RQ

Other exercises in this chapter

Q9RQ

Why is the sales budget considered the cornerstone of the master budget?

View solution

Q10RQ

What is the formula used to determine the number of units to be produced?

View solution

Q12RQ

What are the two types of manufacturing overhead? How do they affect the manufacturing overhead budget calculations?

View solution

Q13RQ

How is the predetermined overhead allocation rate determined?

View solution