James Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is: January 43,800 February 41,000 March 50,250 Each drum requires 5.5 gallons of chemicals and one plastic drum. Company policy requires that 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 P100. The cost of one drum is P80. (Note: Round all unit amounts to the nearest units. Round all the peso amounts to the nearest peso.) Required: 1. Prepare a direct materials purchases budget for chemicals for the month of January and February. 2. Prepare a direct materials purchases budget for drums for the month of January and February.
James Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is:
January 43,800
February 41,000
March 50,250
Each drum requires 5.5 gallons of chemicals and one plastic drum. Company policy requires that 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 P100. The cost of one drum is P80. (Note: Round all unit amounts to the nearest units. Round all the peso amounts to the nearest peso.)
Required:
1. Prepare a direct materials purchases budget for chemicals for the month of January and February.
2. Prepare a direct materials purchases budget for drums for the month of January and February.
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